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The Ladder Lawsuit refers to a class action lawsuit that is brought against CitiMortgage and their practices in terms of their promotion of the Ladder Company. In this lawsuit, plaintiffs claim that they were defrauded by this sale and/or the issuance of illegal orders. In terms of the ladders lawsuit, this sale promoted a ladder that was illegally advertised in advertisements and on websites. This sale promoted a higher interest rate through what is known as a stacked ranking scheme.
The lawsuit further claims that CitiMortgage was aware of the stacked ranking system and did nothing to resolve the issues of whether or not this sales practice was dishonest. Further, the lawsuit contends that this was the third and fourth mortgages sold with the assistance of illegal activity. As a result of this, and the knowledge that the misrepresentation of loan benefits was already rampant, the lawsuit contends that the lenders used the Ladder Lawsuit to force these homeowners into refinancing with even higher interest rates than were already associated with the loans. This is due to the fear that the homeowners may default on the loans. In addition, the lawsuit claims that CitiMortgage did not provide the required disclosures to the borrowers to make them aware of the dangers associated with the products they were being encouraged to purchase.
The Ladder Lawsuit is not only about high interest rates and misrepresentation, however. This is also a class action lawsuit that is brought against CitiMortgage as well as several other mortgage companies including defendants Home Capital and CMHC. The claims in this case center around the illegal foreclosure of borrowers’ homes. The lawsuit also claims that the lenders engaged in improper practices in the promotion of the ladders and other riskier longer term projects. This class action lawsuit is one of the larger cases out in the United States and is currently underway in a U.S. District Court in Brooklyn.
One of the more unfortunate aspects of this lawsuit is the fact that it focuses on borrowers who had purchased residential properties as a means of purchasing a home. When these homeowners made the purchase, the contract typically stated that if the borrower should become delinquent on the loan repayments for at least three months, then the lender would sell the property to pay off the loan. The Ladder Lawsuit argues that the lenders used this provision to force the borrowers into taking out higher payments on the mortgages so that they could pay the loan in full – a scheme designed to allow the lenders to profit from the sale of the homes even if the borrowers were no longer living in them. There is currently a motion pending in New York courts that would eliminate this requirement, but for the time being, the lawsuit continues.
For the homeowners, the Ladder Lawsuit believes that the sale of the homes was driven by the lenders’ desire to earn profits from the foreclosures. They argue that because the mortgages were inherently riskier longer-term projects, the lenders were able to inflate the interest rates on the loans and sell them for a higher profit than what the borrowers would have paid based on the properties’ fair market value at the time of the sale. This inflated higher interest rate benefited the lenders because it drove up the price of the properties they were purchasing. But for the borrowers, the Ladder Lawsuit contends that this inflated higher interest rate harmed their ability to pay the higher monthly payment on the loan, especially when combined with the increased risk associated with owning a home in an area with high crime rates and other risk factors.
If the plaintiffs win the Ladder Lawsuit, they will be able to recoup some of the losses they suffered in the attempt to refinance the loans through the sale of the homes. However, they are hoping that the ruling will open the floodgates for other homeowners who may wish to take advantage of riskier longer-term projects. In the current economy, banks are more cautious with their loans, which can mean that homeowners could be stuck with mortgages for years without being able to make the monthly payments. While the lawsuit may help the plaintiffs in the short term, the real issue is whether or not these lenders will be receptive to making more loans in the future – assuming that they will be given another chance at a higher interest rate and a lower monthly payment.
