The complaint for this class action claims that Flagstar Bank failed to pay interest on mortgage escrow or impound accounts, as required by California law.
The class for this action is all owners of one- to four-family residences in California secured by a mortgage serviced by Flagstar Bank FSB and/or Flagstar Bancorp, Inc. who maintained an impound account through Flagstar, between June 21, 2014 through the date of class notice, and who did not receive 2% simply interest on the balance of the account during that period.
Flagstar Bank has its headquarters in Michigan but also operates branches in California. Its mortgage division has ninety-two locations along with brokers and correspondent lenders in all fifty states. In its role as a servicer or subservicer of mortgages, it keeps records on $104 billion in mortgages.
Lenders often require that mortgage borrowers provide amounts for crucial payments directly to them. These usually involve insurance on the property and property taxes, and lenders require that the payments are made through them so that they can ensure that the payments are made and that there are no liens on the property securing the mortgage.
The amounts required for these payments are generally divided into monthly portions. When borrowers pay their mortgages every month, they pay a portion of these costs as well. For example, if a borrower must pay $1,200 a year in property taxes, the lender will ask the borrower to pay $100 or 1/12 of this sum per month. The lender holds these funds in an escrow or impound account, then pays them once a year when they come due.
Laws in various states require that lenders who hold money for customers in this way must pay interest on the sums held throughout the year. Although the requirements differ from state to state, the law in California is clear. For mortgages on one- to four-family homes, it requires that a financial institution “that receives money in advance for payment of taxes and assessments on the property, for insurance, or for other purposes relating to the property, shall pay interest on the amount so held to the borrower.” The amount that must be paid is “at least 2 percent simple interest per annum.”
Plaintiff Robert Wilde claims that he deposited roughly $1020 per month into his escrow account for property taxes and home insurance, but that the bank did not pay him this interest on the account.
The complaint claims that the bank has violated California’s Unfair Competition Law and is guilty of negligence and breach of contract, among other things.