Q: I want to pay off my credit card debt by refinancing my mortgage. My mortgage broker told me that if I want to get a low interest rate, I should enter into an adjustable rate mortgage (ARM) now, and that she will refinance me in two years. Is that a good idea?
A: NO! Unless your mortgage broker puts her promise to refinance you in writing, it is a practice that is prohibited by the Consumer Sales Practices Act (CSPA), Ohio’s consumer protection law that forbids unfair, deceptive, and unconscionable acts and practices in residential mortgage lending transactions between individuals and mortgage brokers, non-bank lenders and appraisers.
Q: My mortgage broker instructed the appraiser to set the appraised value of my home at the amount I need to borrow, regardless of the actual value of my home. Is this legal?
A: No. The CSPA prohibits knowingly instructing or influencing an appraiser for the purpose of obtaining a false or inflated appraisal for a residence that will be subject to a mortgage.
Further, if your loan amount is based on an inflated appraisal, you may not be able to refinance your mortgage in two years. This will be especially troublesome if you entered into an ARM loan. You also may not be able to sell your house for enough money to pay off the mortgage. When that happens, it is sometimes called "being under water" or "upside down."
Q: Who will investigate my mortgage broker’s conduct to see if a violation of the CSPA occurred?
A: The law allows the Ohio Attorney General to investigate alleged violations of the CSPA. If there is reasonable cause to believe that your mortgage broker, or any other business entering into transactions with individuals for goods or services for personal, family and household purposes (known as “suppliers” under the CSPA) has broken the law, the Attorney General may bring a court action to stop the practice and enforce the law.
The court may award you “damages” (order the supplier to pay you back for what you’ve lost), and may also impose a civil penalty that would be paid to the state (the maximum is $5,000 per day) for each day the supplier violates an order to stop the practice. The Attorney General also may initiate a class action (a lawsuit brought on behalf of many people) in certain circumstances.
Q: How do I bring my situation to the attention of the Attorney General?
A: You may fill out an online complaint form available at www.ohioattorneygeneral.gov/Individuals-and-Families/Consumers, or you may call the Ohio Attorney General's Consumer Protection Hotline at (800) 282-0515 to request a complaint form by mail.
Q: What if the Attorney General can’t help with my case? Is there anything else I can do?
A: The Attorney General cannot possibly prosecute every violation of the Consumer Sales Practices Act. That is why the law also allows you to bring a civil action directly against the wrongdoer. To do so, it is wise to consult a private attorney, who can bring the civil action against the wrongdoer on your behalf.
Q: What might I be able to recover if I prove the supplier broke the law?
A: If you prove your mortgage broker violated the CSPA, you may be able to recover all damages that result from the violation. These could include out-of-pocket costs such as the broker fee, an increased sale price (if the appraiser was wrongly influenced to present an inflated value), increased interest expenses, increased closing costs, and other expenses.
You also may be able to recover non-economic damages in an amount up to $5,000 for aggravation, frustration, humiliation, anxiety and distress. In some circumstances, the court can triple the damages. If the supplier acted knowingly, you also may recover attorney fees. Other potential remedies include rescission (voiding the transaction and restoring the parties to their position before the transaction occurred), class action relief, and punitive damages.
Q: Will this law help me if my lender has filed a foreclosure action against me?
A: Maybe. If your lender, mortgage broker, or appraiser violated the CSPA in originating or arranging your loan, you may be able to bring a counterclaim against the foreclosing non-bank lender and/or a third-party claim against your mortgage broker or appraiser. The law regarding whom you may sue is complicated. It is best to review your potential claims with a qualified consumer protection lawyer.
Q: Where can I find a qualified consumer protection lawyer?
A: Many local bar associations have lawyer referral programs to assist you in finding a lawyer to help with your case. The National Association of Consumer Advocates website (www.NACA.net) lists consumer protection lawyers by city, state, and areas of qualification.
This "Law You Can Use" column was provided by the Ohio State Bar Association (OSBA). It was originally prepared by attorney Laura McDowall of the Akron law firm McDowall Co., L.P.A. and attorney Rachel K. Robinson of the Equal Justice Foundation based in Columbus. It was updated by Dayton attorney Ronald Burdge.