Magazine article American Banker

Minn. Sues Countrywide over Mortgage Insurance

Magazine article American Banker

Minn. Sues Countrywide over Mortgage Insurance

Article excerpt

A lawsuit against two units of Countrywide Credit Industries charges that they are breaking Minnesota law by forcing homeowners who cancel private mortgage insurance to order appraisals through a third Countrywide unit.

The suit, filed Wednesday, names Countrywide Home Loans Inc. in Calabasas, Calif., and Countrywide Home Loans Servicing LP in Plano, Tex. The third unit is LandSafe Appraisal Services Inc., also of Plano.

Countrywide would profit from this arrangement, the suit says, because LandSafe keeps a portion of the appraisal fee.

Lenders typically require borrowers who put less than 20% down to buy private mortgage insurance as an added protection against defaults. According to the office of Minnesota Attorney General Mike Hatch, borrowers pay an average of $40 to $65 a month for the insurance.

But Minnesota law lets homeowners cancel the insurance if they prove with an appraisal that they have built 20% equity. It also lets borrowers choose any appraiser that is "reasonably acceptable to the lender," the suit says.

It charges that Countrywide not only forced homeowners to use LandSafe, but also hid a required annual notice about the right to cancel the insurance.

In a press release Wednesday, the attorney general's office said: "The law requires a prominent notice in a 12-point type size on its own piece of paper with simple, clear wording. Rather than complying with the law Countrywide issued its own version of the notice in smaller type at the bottom of a page containing IRS disclosures. …

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