Barclays American Mortgage Corp. and PNC Mortgage Corp. are set to become the latest mortgage servicers to pay the piper for allegedly over-escrowing borrowers mortgage accounts, as both have entered into proposed settlement agreements under separate class-action lawsuits. But PNC will apparently get a discount rate on pipers, since its proposed settlement will cost it just 25 cents a borrower.
The cases, Daniel and Suzanne Kruse vs. Barclays American/Mortgage Corp., and Louis H. and Sue Meserow vs. PNC Mortgage Corp. were filed in the U.S. District Court, District of Minnesota, Fourth Division, and the proposed settlements have been scheduled for review Oct. 5 and Oct. 14, respectively.
The PNC-Meserow settlement has been tentatively approved by the court, PNC said. Barclays declined to com-ment.
The PNC and Barclays suits are two of roughly 80 over- escrowing defendants in cases tied to alleged violations of the Real Estate Settlement Procedures Act pending in about 12 states. A growing number of those class-action suits have been settled recently with several of the largest mortgage servicers in the country, including BancBoston Mortgage Corp. and U.S. Bancorp Mortgage Co.
The suits alleged that PNC and Barclays required borrowers of loans they serviced to overpay into escrow accounts for realty taxes, insurance and other assessments permitted under the loan contract.
Under the terms of the PNC settlement, members of the class will be entitled to receive a one-time rebate. Current PNC customers that are members of the class will receive 25 cents, which will be automatically credited to their accounts. Class members who have either paid off or transferred their loans prior to Feb. 1, 1994, will receive 50 cents, provided they submit a claim. PNC has also agreed to pay the plaintiffs counsel, the Minneapolis-based law firm of Zimmerman & Reed, which is also handling the plaintiffs case against Barclays. The case will be dismissed with prejudice if the proposed settlement is approved.
PNC has agreed to the settlement solely [to avoid] the burden and expense of further protracted litigation, said Jonathan Williams, a PNC spokesman. PNC has not conceded that plaintiffs claims have any merit. The company has consistently denied and continues to deny any liability.
Portions of the PNC agreement closely resemble settlements agreed to by other mortgage servicers recently. The settlement requires PNC to provide borrowers with a periodic analysis of the funds kept in escrow. A similar agreement was reached by U.S. Bancorp Mortgage Co., of Portland, Ore. USBMC also agreed to switch to the single-item escrow accounting method, shifting from the aggregate method that prompted that and many other lawsuits.