This class action lawsuit claims that Ocwen Loan Servicing, LCC, breached its contract with consumers through a systematic practice of charging illegal prepayment penalties in the form of “post-payment” interest on loans insured by the Federal Housing Administration without first complying with the uniform provisions of the promissory notes and the FHA regulations governing these loans.
Post-payment interest refers to interest that a lender collects after the borrower has paid the full unpaid principal of the loan. For example, if a borrower pays off the loan in full on August 5, and the lender continues collecting interest for the remainder of August, the lender has collected post-payment interest from the borrower. A promissory note governs the contractual relationship between borrowers and lenders, and the FHA regulations require that lenders issuing FHA- insured loans must include certain uniform provisions in the notes for these loans. Among other things, the uniform provisions require that “interest will be charged on unpaid principal” and interest charges must stop once “the full amount of the principal has been paid.” The FHA regulations permit lenders to collect post-payment interest for the remainder of the month in which full payment is made only when two strict conditions are met: (a) the borrower makes payment of the full unpaid principal on a day “other than the first of the month” and (b) the lender must provide the borrower with “a form approved by the FHA.”
Ocwen does not use the FHA-approved form as required by both the uniform provisions of the note and the FHA regulations, so it has no right to charge post-payment interest from borrowers. Because of this action, Ocwen has unlawfully collected hundreds of millions of dollars in post-payment interest, and it will continue to do so in the future.
Two plaintiffs in this lawsuit, Leo and Jessica Ramirez, are residents of Lawrenceville, Georgia. On August 20, 2010, Fairway Independent Mortgage Corporation loaned them money for the purchase of a home in Lawrenceville. Ocwen later acquired the loan. The loan was insured by the FHA, so Ocwen is required to comply with FHA regulations with respect to the loan. In 2013, Leo and Jessica Ramirez refinanced the loan and requested that Ocwen provided them with a payoff statement so they could pay off the loan. In the payoff statement, dated March 29, 2013, Ocwen represented that they owed $911.57 in interest. This interest was charged for the entire month of April, even though the payoff occurred before May 1, 2013. On April 4, 2013, Leo and Jessica Ramirez paid Ocwen $258,540.11, which includes the $911.47 in interest, therefore Ocwen collected post-payment interest without providing the FHA-approved form.
Based on the facts of the case, the plaintiffs allege that Ocwen committed breach of contract and call for declaratory and injunctive relief.