Calif. slapped with another lawsuit
|February 11, 2003|
Quicken Loans claims federal law mandates interest payments, not state
Inman News Features
Quicken Loans today followed Wells Fargo's lead when it filed a lawsuit against California's Department of Corporations, seeking a ruling that federal law supercedes state law governing mortgage interest payments.
The lawsuit alleges that the state has disregarded federal law by requiring lenders to make mortgages to California borrowers without interest until the loan is recorded.
Like a similar lawsuit filed by Wells Fargo Bank and its mortgage subsidiary, Quicken Loans argues that federal law takes priority over state law.
No one at the California Department of Corporations was immediately available to comment on the suit.
The California law prohibits lenders from charging interest until the mortgage is recorded by the title company and county recorder's office. Quicken Loans CEO William Emerson said the recording process can sometimes be delayed, and that the state law basically gives the borrower full use of the funds without paying interest during that time.
"Borrowers expect to pay interest once they receive the money. They are not being charged more than they actually owe on their loan. They've signed a note promising to pay the lender interest for the use of the money, starting the day they receive the money," he said.
Federal law permits mortgage lenders to charge interest as soon as the borrower has use of the funds, regardless of whether the mortgage has been recorded. Quicken Loans argues that interest charges should be tied to the disbursement date, not the recording date.
California regulators responded to Wells Fargo's lawsuit last week by initiating an administrative action to revoke the bank's state mortgage license.
Quicken Loans said it will continue to offer home mortgages, refinancing and home equity loans in California despite the lawsuit.
Quicken Loans is a mortgage originator based in Livonia, Mich. The company has 1,300 employees and originated $7 billion in mortgages last year. The company was formed in June 2002, when tax and accounting software maker Intuit spun off its Quicken Loans operation to a holding company owned by management and private investors in exchange for cash, a note and multi-year licensing fees. Quicken Loans licenses its the trademark from Intuit and provides mortgage services on Quicken.com through a distribution agreement between the two companies.
Copyright: Inman News Service