Borrowers seeking refunds from failed thrifts for errors on adjustable-rate mortgages have sued the U.S. agency overseeing the $500 billion savings and loan crisis.
The class-action suit against the Resolution Trust Corp., filed Friday in the U.S. District Court in Indianapolis, is believed to be the first of its kind against the agency.The loans in question were taken out at two thrifts - later seized by the government - by Byron and Wilma Wheeler of Indianapolis and Barnie and Della McDonald of Metairie, La.
The suit said the interest rates on the loans were higher than they should have been when they were periodially adjusted and that the plaintiffs were overcharged.
The suits seek an unspecified amount of damages, court costs and attorneys fees for themselves and all others damaged by the actions of the savings institutions.
"The RTC has become liable for injuries to consumers resulting from interest-rate adjustment errors made by failed savings and loans and other financial institutions," the suit stated.
Consumers who took out adjustable-rate mortgages in the 1980s are estimated to have been overcharged billions of dollars by simple errors when they were adjusted upward and downward.
Rates on ARMs are adjusted periodically, as opposed to fixed-rate mortgages that carry a flat interest rate for the life of a loan.
The RTC had no immediate comment on the suit.
"I expect the pace of litigation to increase dramatically, as quickly as willing plaintiffs want to," said Peter Racher, associate attorney at Plews & Shadley, an Indianapolis law firm representing the plaintiffs.
The Wheelers took out an adjustable-rate mortgage in June 1985 for $146,000 from First Federal Savings and Loan Association of Central Indiana, in Anderson. It was seized by the government in November 1989 and sold to Shelby Federal Savings Bank of Indianapolis in October 1990.