New trend? Suing mortgage lenders for issuing a “defective product”
Mortgages are dangerous toys.The statement itself is ludicrous. Mortgages should be neither dangerous nor toys.But let’s not fool ourselves. That’s what they became in the infantile hands of some banking underwriters and real estate speculators. They cut corners to earn quick-and-easy profits.We used to call that simple greed.So what to make of the attempt to turn sloppy mortgage lending into a punishable offense by referencing product liability laws?You got sick from E. coli-tainted beef and sued the restaurant?Do the same to the bank that sold you the tainted mortgage.Linda Soronen aims to test that theory.The Tampa Bay retiree is suing Wachovia Bank, claiming her no-documentation mortgage was a defective product that ruined not just her finances but the finances of millions of borrowers across the United States.On the theory that the best defense is a lethal offense, Soronen sued in early January after Wachovia announced plans to foreclose on the Largo house she bought in 2006.No-doc loans, also known as liars loans, required little or none of the typical paperwork bankers used to gauge financial fitness: work pay stubs, federal tax forms, accurate bank balances.Soronen borrowed $162,000 from World Savings Bank, a California lender known as a top purveyor of liars loans. Wachovia bought World Savings in 2006. Hobbled by that acquisition, Wachovia was swallowed by Wells Fargo Bank in 2008.At the time of the loan, Soronen was a “partially disabled, unemployed 57-year-old nurse with no income.”So World Savings was reckless in granting her the loan that ultimately wrecked her credit?Not so fast. No-doc loans require no pay stubs, but they do require you estimate your income on the application.Presumably, Soronen inserted a figure that pleased the bank. If that figure wasn’t accurate, it’s hard to blame the lender. Soronen says the application was misleading. It requested family income, including her husband’s, even though she was sole party to the loan.Soronen is seeking class-action status and wants her loan voided. She also requests $10 million in punitive damages, money she intends to donate to the state.Her husband, William Soronen, is a retired lawyer. He’s doing the legal paperwork.Do shoddily approved mortgages rise to the level of faulty automobile accelerators, asbestos exposure or toys that go pop in a toddler’s hand? “Defective” mortgages haven’t exactly become a new sideline for litigation-happy Florida law firms.But that doesn’t mean we should let lenders wriggle off the hook. One fatality from a dangerous product is a tragedy. Hundreds of billions of dollars worth of fatally compromised mortgages should be more than a statistic.
via New trend? Suing mortgage lenders for issuing a “defective product” – St. Petersburg Times.