At least three dozen class actions have been filed against lenders over alleged failure to disclose when mortgage insurance is no longer required.
Zimmerman Reed, Minneapolis, and Langston & Frazer, Jackson, Miss., law firms that specialize in class actions, have filed the lawsuits, mostly against lenders.
These suits are the latest in a rash of class actions targeting lenders. The plaintiff lawyers say in the newest suits that lenders do not adequately disclose to borrowers their right to cancel mortgage insurance after their home equity climbs to a certain level.
Investors generally require mortgage insurance for mortgages with a down payment of less than 20% of the loan's total value.
A borrower with a $100,000 loan who had paid 10% in a down payment, for example, would initially pay $468 a year at Mortgage Guaranty Insurance Corp., Milwaukee.
Ronald S. Goldser, a partner at Zimmerman Reed, said the firm, which is responsible for about a dozen class actions over mortgage insurance, has targeted TCF Mortgage Corp., Minneapolis, and Principal Residential Mortgage Inc., Des Moines, among others.
Mortgage Guaranty, based in Milwaukee, is involved in two or three cases in Alabama and Minnesota, a spokesman said.
Gregory J. Pulles, general counsel of TCF Financial Corp., parent of TCF Mortgage, said the case is "totally without merit. ... We have done nothing wrong."
The issue has not escaped legislative notice. The Wisconsin legislature is considering a bill that would require better disclosure on mortgage insurance by lenders. California already has such a law.
For the last several years, lawyers have rained lawsuits on lenders over everything from loan pricing to the way loans are paid back. And lawyers say lenders will continue to be spotlighted.
"There are a lot of practices that need to be cleaned up in the mortgage lending industry," said Zimmerman Reed's Mr. Goldser.
Several class actions have been filed recently over the way mortgage brokers are paid for closing loans. GE Capital Mortgage Services Inc., Elkins Park, Pa., and Associates of North America, a Dallas subsidiary of Ford Motor Co., are now among those facing class actions over their payment methods.