ALBANY, N.Y.--One of the country's largest mortgage lenders, accused of overcharging on its mortgage escrow accounts, has reached a $150 million settlement with 26 states, New York Attorney General Robert Abrams said Monday.
New Mexico was one of the states included in the settlement.
About 700,000 mortgage holders with Fleet Mortgage Corp. and Fleet Real Estate Funding Corp. will receive an average $150 in refunds or reduced mortgage payments under the agreement, Abrams said. The customers slated for benefits represented about 2 percent of the nation's mortgage holders, he said.
The Fleet companies also agreed to pay $520,000 to the 26 states that joined in the settlement, which the states were filing Monday in U.S. District Court in Manhattan, Abrams said.
It's not the first time Fleet Financial Group of Providence, R.I., parent of the Fleet banking companies, has run into trouble in the mortgage lending business.
Fleet Finance Inc., another Fleet subsidiary, is facing lawsuits on Georgia over alleged unfair lending practices. Fleet has denied wrongdoing in those suits. Fleet also has mortgage lending controversies in Chicago, Philadelphia, and Boston.
New York State is also investigating thousands of other mortgage lenders, whose customers have complained they've paid too much into their mortgage escrow accounts. Abrams said.
"We dug deeper and found that this system is virtually universal," he said at a news conference.
Abrams estimated that between $5 billion and $10 billion in illegal escrow funds are paid to mortgage lenders nationwide.
Mortgage companies require homeowners to enter into loan agreements that establish escrow accounts to cover property taxes and insurance premiums. Under federal law, lenders are allowed to collect up to a two-month surplus of escrow payments in case homeowners fall behind on their mortgage.
In Fleet's case, the attorneys general found that while the company's mortgage contracts called for up to only a one-month cushion, Fleet routinely collected more than a two-month surplus from its customers, Abrams said. Fleet collected $150 million in interest from the excessive escrow charges, he said.
Most Fleet mortgage holders didn't realize they were being overcharged because they didn't understand the laws, he said.
Fleet signed the agreement without admitting wrongdoing. The company has one year to make the refunds and recalculate the mortgage payments.
In addition to New Mexico, other states included in the settlement were: Alabama; Arizona; Arkansas; California; Connecticut; Delaware; Florida; Idaho; Illinois; Iowa; Maine; Maryland; Massachusetts; Minnesota; Nevada; New Jersey; New York; North Carolina; Oregon; Pennsylvania; Tennessee; Texas; Vermont; Washington and Wisconsin.
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