Citibank Charged Excessive Mortgage Default Fees: Lawsuit

Citibank has been hit with a class action lawsuit alleging that they charged excessive fees for default-related services after borrowers fell behind on their mortgage payments. According to the suit, once a borrower’s account enters “default” or “delinquency” status, Citibank assesses fees for a number of services, such as property inspections and attorney fees, which are supposed to protect the lender’s interest in the property. While the bank is permitted to charge a borrower for services related to their mortgage default, Citibank is alleged to be marking up fees for these services, typically performed by third parties, by 100% or more to quietly profit at the expense of already-struggling homeowners.

Citibank and "Delinquency Fees" on Defaulted Mortgage Loans

The plaintiffs in the class action suit against Citibank allege that these excessive fees can be identified on mortgage statements with "cryptic descriptions" such as "delinquency fees." According to the suit, some mortgage statements stated that these charges are "third-party expenses such as property inspection fees, property preservation costs, appraisal costs, and attorney fees incurred by CMI as a result of the default," but did not properly disclose the true nature of the fees or inform borrowers that these fees could contain mark-ups. In addition, these charges were not itemized and the individual services that formed the basis for the fees were not identified, leaving borrowers with uncertainty as to what services they were charged for and what they were paying for each service, according to the suit. Lastly, it has been alleged that by stating “such as,” and providing a list of potential fee types, borrowers are unable to identify whether there were other categories of fees which could be assessed under the delinquency expenses charge.

Unnecessary Services Included in Delinquency Fees

In addition to inadequate disclosures, the suit alleges that Citibank was not charging borrowers for the actual costs of the third-party services, but rather assessing significantly marked-up fees for sometimes unnecessary services. According to the suit, Citibank uses a loan management system which automatically orders property inspections and charges borrowers for these inspections when their account has been marked as "delinquent" for a certain number of days. So long as the account remains delinquent, charges for property inspections will be ordered on a monthly basis for inspections that are unjustified and unnecessary, according to the allegations. For instance, one plaintiff claims that he was charged for more than 30 property inspections over the course of three years.

Losses Resulting from Excessive Mortgage Fees

The suit alleges that borrowers not only suffered financial losses when they were charged excessive fees, but also incurred damage to their credit scores, with some claiming that they were driven into foreclosure.

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