A recent proposed class action lawsuit filed in Illinois against CitiMortgage
Inc., the mortgage-lending arm of Citigroup Inc., and Safeguard Properties
LLC, claims they violated the Racketeer Influenced and Corrupt Organizations
Act (RICO) by conducting illegitimate property inspections on defaulting
mortgage properties and subsequently billing borrowers for the related charges.
Borrower, George Michael, who defaulted on his mortgage in 2010, brought
suit against CitiMortgage and Safeguard claiming they conducted dozens
of unjustified property inspections in an attempt to run up default fees
on distressed borrowers. Michael’s claims also allege violations
of the Federal Fair Debt Collection Practices Act, Illinois consumer fraud
regulations, and breach of contract.
Michaels claimed that the defendant’s property inspections were cursory
at best, noting that many of the inspections took place without the appraiser
exiting their vehicle. They went on to further claim that the inspections
were “gratuitous” and seemed to be done for no other reason
than to increase penalties on the defaulted borrower, and making it harder
for them to cure their default.
The defendant’s alleged practice included picking out any delinquent
residential property owners and then scheduling recurring property inspections,
mostly done by simple drive-by assessment, as opposed to conducting a
standard physical inspection. Michael’s complaint argues these quasi-inspections
were carried out solely to generate revenue for the defendants—serving
no purpose other than to further indebt struggling homeowners with excessive
and unwarranted fees.
The plaintiff’s brief highlights the relevant HUD regulations stipulating
that lenders and servicers may only be reimbursed for recurring property
inspections following an unsuccessful attempt to contact the borrower
to determine if there is a potential risk of property abandonment, or
verify the property as vacant.
The Class claims that CitiMortgage schedules the inspections by way of
an automated software system without first verifying if there is any evidence
that the properties are at risk of abandonment or presently vacant; arguing
that there is no reason to undertake repeated inspections on properties
that are occupied and maintained.
The suit seeks representation for two separate classes of any U.S. or Northern
District of Illinois homeowner who was delinquent on a Citi loan and subsequently
charged for default-related property inspections, carried out while they
still occupied the property, and conducted without an attempt by the lender
to contact the homeowner to obtain occupancy status.
These are strong allegations that may arise to fraud if proved. I can’t
help but think of the Robo-signing fiasco and mortgage crises of 2008.
The innovations of technology can simultaneously aid and harm the mortgage
industry. Geraci Law is following this case closely for what can be another
catastrophic outcome for lenders who regularly conduct property inspections
on defaulted borrowers. It is a catch 22 – lenders must take precautions
to safeguard their property by conducting inspections, especially in light
of their investors, yet now they may be required to go a step further
by attempting and repeatedly failing to contact the defaulted borrower
– who is not readily wiling to speak to the lender – and determine
if they have in fact abandoned the property before they inspect it.
Contact Geraci Law Firm at (949) 298-8050 today, for more information. Learn more about