Citicorp Units Sued over Mortgage Errors
CHICAGO - CiticorpMortgage Inc. and Citibank have been accused of making systematic errors in adjustable-rate mortgages that resulted in over-charges to consumers.
Consumer Loan Advocates, a Chicago-based loan research firm representing the plaintiffs, said the Citicorp units may have made errors on as many as 47,000 mortgages that could lead to overcharges of $28 million to $50 million.
The suit, filed last Wednesday in circuit court in Citicorp Mortgage's hometown of St. Louis, seeks to certify a class of incorrectly calculated Citicorp adjustable loans.
"Citicorp did not adjust the loans according to the contract," John Geddes, president of Consumer Loan Advocates, said at a new conference in Chicago.
New Yorker Seeks $15,000
The initial plaintiff in the suit, Shimon Israel of New York, seeks more than $15,000 in damages.
Mr. Geddes, who studied adjustable-rate mortgages with the former Federal Savings and Loan Insurance Corp., said Citicorp used the wrong index to adjust Mr. Israel's $95,000 mortgage and overcharged him $600 between 1983 and 1989.
A spokesman for Citicorp Mortgage in St. Louis declined to comment on the suit, which the company had not yet seen.
Errors Called Unintentional
Mr. Geddes said the errors were unintentional, most likely caused by clerical and computer glitches. But Citicorp ignored the errors for several years, he said.
Mr. Geddes has previously said adjustment errors are widespread in the mortgage industry. Based on Consumer Loan Advocates' research, as many as a third of the 30 million adjustable mortgages could be subject to errors, with an average overcharge of $1,500 per loan over three to six years.
The problem could lead to overcharges of $8 billion to $10 billion, Mr. Geddes estimated.