California Borrowers Accuse Norwest of Inflating Fees

Norwest Mortgage is overcharging borrowers for services when it originates loans, according to a class action filed last week in California.

The suit may affect "thousands of borrowers," according to a statement released by plaintiffs' layers.

At issue is the amount Norwest charges borrowers for items such as credit reports and appraisals that it obtains from third parties.

For example, Norwest charged one borrower $26.50 for a credit report for which it paid only $14, the suit says, and did not disclose the actual cost.

The suit alleges that Norwest violates California's laws against unfair competition.

Plaintiffs' lawyers are seeking out Norwest borrowers who may be affected via a Web site that lists numerous class actions.

Three of the lawyers filing the suit did not return repeated calls, and the fourth said he was "done commenting on the suit."

Norwest, which originated $55.2 billion in loans in 1997, released a statement saying it could not comment on the specific allegations because it had not seen the suit. However, it said, it has a long-standing policy against marking up third-party costs.

Mortgage lenders have been the subject of dozens of class actions in recent years, in part because regulations about disclosure are not clear, they say.

Many of these cases have been settled out of court, leaving little legal precedent as guidance.

There is currently no federal law that would hold Norwest liable for differences between what it paid and what it charged for most of these services. A 1995 revision of Truth-in-Lending laws made lenders no longer liable for any difference under $100.

Lawyers who represent mortgage lenders dismissed the suit as typical of an overzealous plantiffs bar. Class-action lawyers have "put a microscope onto every aspect of the residential mortgage business and attacked it," said Leonard A. Bernstein of Reed Smith Shaw & McClay, Philadelphia.

"It's something, unfortunately, the lending industry is getting used to," he said, "although it's not very happy about it."

The risk of a class action now "dwarfs the examiners," Mr. Bernstein said. "That's not what class-action suits are intended to be used for."

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