Early mortgage payoff shocker

In the case Madura v. Countrywide Home Loans Inc., Full Spectrum Lending mailed borrowers loan documents to sign and the borrowers signed and returned the documents via mail.

(Of the borrowers, the husband signed the loan documents, and the wife only signed to exclude herself from the transaction.) Based on this, Full Spectrum extended a loan of $87,750 that was secured by the borrowers' principal residence. Five days later, Countrywide Home Loans purchased the loan from Full Spectrum.

Less than eight months after closing the loan, the borrowers sought to pay the loan off in full but were advised by Countrywide Home Loans that a payoff would incur a prepayment penalty of more than $5,000.

The borrowers objected that they had never agreed to a prepayment penalty and demanded to be provided with a copy of the documents Countrywide claimed obligated borrowers to the penalty.

Countrywide allegedly refused to provide such a document but did provide copies of other loan documents purportedly signed by the borrowers.

According to court documents, a forensic document-examiner found that the borrowers' initials appeared to be forged on the documents that were provided by the lender. Without acknowledging forgery, Countrywide agreed to waive the prepayment penalty but refused the borrowers' demand to rescind the loan.

The borrowers brought state and federal court claims against Countrywide, alleging forgery and fraud, among other things, and seeking statutory damages for violations of the federal Truth In Lending Act (TILA). At the district court level, the husband's claims were compelled to arbitration, under the terms of his loan documents.

The wife's various claims were dismissed for having been already determined in the state court action to lack standing (as a non-borrower), to be barred by the one-year statute of limitations, and to lack damages (inasmuch as the lender had waived the prepayment penalty). ...CONTINUED

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