Local lawyers settle ARM suit against Citicorp for $3.5M
By Greg Andrews, IBJ Reporter
A group of Indianapolis lawyers who have alleged a nationwide pattern of incorrectly calculated adjustable rate mortgages have reached a settlement with one of the country's largest banking companies.
New York-based Citicorp has agreed to refund overpayments of about $3.5 million and forgive underpayments of about $4 million to settle a class-action lawsuit filed in October 1991 in St. Louis County, Missouri Circuit Court.
The Citicorp case is one of nearly a dozen similar cases filed in the last several years by the Indianapolis law firms of Price & Barker and Plews & Shadley. A few of the cases have been settled, including one against Bloomington-based Workingmens Capital Holdings Inc.
The issue came to the fore three years ago after M. Scott Barrett, an attorney with Plews & Shadley, discovered an error in his own mortgage and the mortgage of one of his clients.
Barrett became aware of the national scope of the problem through the work of John Geddes, a Mays, Ind., man who had discussed the problem on national television.
Lawyers say the errors vary by institution. In some cases, errors occurred when banks incorrectly rounded rates, calculated rates based on the wrong index, or recalculated the rates at the wrong time.
A 1990 General Accounting Office, the investigative arm of Congress, said that as many as one in four Americans with an adjustable rate mortgage may have been paying too little or too much.
The Citicorp settlement could affect 240,000 mortgages nationwide. Notices informing the class of the proposed settlement are scheduled to be mailed out this week.
The original suit had not specified how much money should be repaid. Negotiations focused on how to reamortize the mortgages and other issues.
"We think it's a fair settlement that obtained, for the broadest possible class, fair compensation for the damages which they suffered," Henry Price of Price & Barker said.
Gary Wilson, a Washington, D.C. attorney representing Citicorp said: "The determination was made that it was a reasonable settlement and it was more advantageous than litigating complicated issues that otherwise would have to be litigated."
In the settlement, Citicorp does not admit nor deny doing anything wrong.
The settlement calls for plaintiffs' attorney's fees and certain other expenses to be paid from the settlement money. The court has not yet approved an amount."
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