Throughout the closing years of the nation’s housing boom, mortgage bankers reaped the benefits of fee-laden subprime loans for borrowers with poor credit ratings.
Now, as a record number of homeowners default on those mortgages, financial companies are being forced to swallow billion-dollar writedowns. But as those defaults lead to foreclosures, at least one Queens law firm is allegedly finding that there are still steep fees to harvest.
To contest foreclosure-related charges that range up to $1,515, a Slingerlands man is leading a class action lawsuit bid against CitiMortgage and Sweeney, Gallo, Reich & Bolz of Rego Park.
Edward Herzog filed the suit Monday in U.S. District Court in Albany, alleging that the St. Louis-based CitiMortgage and its retained law firm “hold a monetary gun to the consumer and say, ‘Pay these excessive fees or lose your home,’ ” the suit states.
The class action attempt is being handled by Richard DiMaggio, a Glenville attorney who wrote “Collection Agency Harassment: What the Debt Collector Doesn’t Want You to Know” (2002). The class could consist of more than 100 CitiMortgage borrowers who have also been sued by Sweeney, Gallo for foreclosure. Herzog did not take out a subprime mortgage for his Bullock Road home, which he has now caught up on his payments for. The foreclosure, however, is still pending.
“It’s not a subprime issue. He fell behind on his mortgage, like a lot of people are. … Making money on a foreclosure has become big business,” said DiMaggio.
During the third quarter, the nation’s total delinquency rate for mortgage loans on one- to four-unit residential properties rose to 5.59 percent of all loans outstanding. That marked the highest delinquency rate since 1986. The rate of foreclosure starts and the percentage of loans in the process of foreclosure also reached new all-time highs, according to the Mortgage Bankers Association.
In November, Sweeney, Gallo sued Herzog, a construction worker who by then faced charges of $6,961 on six unpaid mortgage payments, six late fees and servicing fees. CitiMortgage had stopped accepting the checks for his mortgage payment and returned them uncashed. The law firm also charged Herzog $3,565, including a $750 open legal fee and a $1,050 motion for summary judgment fee.
The summary judgment motion — a request for a court to make a decision without a jury — came within a mandatory 20-day period for Herzog to respond to the suit. DiMaggio categorized that fee and some others as false, fraudulent and a form of extortion. He said CitiMortgage knew or should have known about the alleged overbilling and did nothing about it.
“As a direct consequence of these inflated billings, consumers throughout New York state have been bilked out of millions of dollars,” the suit states.
A call to Sweeney, Gallo seeking comment Thursday was not immediately returned.
Herzog paid all the debts he owes to CitiMortgage and Sweeney, Gallo, but the law firm refused to drop the suit because DiMaggio refused to withdraw his answer to it. The Glenville attorney wants Sweeney, Gallo to first file a stipulation to dismiss before he withdraws the answer so Herzog would not be prone to other default claims.