Ten lawsuits charging that mortgage lenders violated the Truth in Lending Act by overcharging borrowers with adjustable-rate mortgages apparently have had the effect of making other lenders much more precise in calculating interest rates.

"We think our lawsuits had the salutary effect of making lenders a lot more careful," said Peter M. Racher, partner in Plews & Shadley, an Indianapolis law firm that is involved in all 10 suits.

An attorney who is assisting defendants' counsel in two other cases agreed that the threat of litigation had made lenders more careful but he said the fact that very few suits have been filed shows that errors were not as widespread as some contend. "When the plaintiffs' lawyers geared up for this a couple of years ago the expectation was that there'd be many suits," said Tom Ristine, partner in another Indianapolis law firm, Ice, Miller, Donadio & Ryan. "There have been very few in Indiana and only 10 nationwide."

The major recent developments include two settlements, one of which will cost the lender $5 million in refunds and interest. That involved First Nationwide Bank, a thrift owned by the Ford Motor Co. More important for the long run, a federal district judge has ruled that ARMs overcharges violate the Truth in Lending Act, a finding defendants strongly dispute.

Not only does TILA specify damages, it permits plaintiffs to seek classification as victims under TILA, a move that is expected soon. Judge Hugh Dillon of the U.S. District Court for the Southern District of Indiana in Indianapolis, had earlier ruled against plaintiffs who sought classification as ARMs borrowers.

Under terms of the settlement, First Nationwide Bank, will recalculate all of its ARMs and repay with interest any over charges above $10. Though the agreement has not been approved by the courts--a hearing is set for Friday, June 5--the company already has paid out more than $3 million and expects the total to go as high as $5 million.

In addition, Nationwide will pay a fine of $175,000, which will be divided among borrowers who were overcharged. An additional $5,000 will also be paid to the plaintiffs, Charlemagne and Lydia Whitford of Louisville, Ky. They alleged that there was an error in the promissory note describing the "fixed date of first rate change." This, they charged, resulted in the interest rate adjustment occurring on the 12th month after origination, instead of the 13th as was specified in the note.

Under the Truth in Lending Act, a lender's maximum liability in a class action lawsuit is the lesser of $500,000 or 1% of its net worth.

At a minimum, a lender would have to pay the amount of the overcharge.

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