Q: I have an adjustable rate loan and my monthly payment has increased a lot over the past two years. At the time I got my loan, the lender showed me a chart under which my monthly payment would only increase in the second year by a small amount and then remain stable. My payment is now double what it was at the beginning. Doesn't Florida have a law against misleading borrowers?
A: The federal government has a lot of laws regulating mortgage lending, most of which require lenders provide information to borrowers prior to closing a loan. In some case, a right of rescission is mandated by statute. Unfortunately, recent events have shown us that the federal regulation mandating disclosure did not include much regulation of who qualifies for a loan and other lending practices.
In addition to the federal laws, Florida has a statute that you might find helpful. Florida's Deceptive and Unfair Trade Practices Act is found at Section 501.201-213 of Florida Statutes.
The FDUTPA makes it illegal to engage in unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce. In determining whether action violates FDUTPA, the statute directs the courts to give due consideration and great weight to interpretations of the Federal Trade Commission and the federal courts under the Federal Trade Commission Act. Specific reference is to that portion dealing with unfair methods of competition and unfair or deceptive acts or practices.
FDUTPA provides a cause of action to both the State and individuals. To establish a claim under the statute, you must allege and prove that your lender engaged in a deceptive act or unfair practice, that the lender's act harmed you and the amount of damages you incurred. It is not necessary to prove fraud, only that the lender engaged in a deceptive or unfair practice.
In the typical borrower case, the damages would be difference between what you paid for your loan (i.e. the interest) and what you would have paid but for the lender's wrongful conduct. Calculation of those damages will vary from case to case.
In addition to actual damages, the prevailing party in a case under FDUTPA is also entitled to attorney fees and court costs. That is important, since attorney fees are not recoverable unless provided by statute or contract.
You cannot recover what is known as consequential damages under FDUTPA. Consequential damages would include loss of your home because you could not pay the mortgage or loss of a job because of poor credit due to inability to pay your mortgage. However, you may be able to recover damages for those claims separately.
Case law indicates you may also be able to obtain punitive damages in action under FDUTPA, although the statute does not allow for them. Punitive damages are imposed on a wrongdoer to punish that person or to discourage others from engaging in similar conduct, where the wrongful conduct is particularly egregious.
FDUTPA has not often been applied to mortgage cases. But, that is changing the recent upheaval in the financial arena.
In one recent case, a federal court confirmed that a borrower sufficiently pled a claim under FDUTPA where the borrower alleged that the lender misrepresented a prepayment penalty at time of the loan. In perhaps a more significant case, the State of Florida has sued Countrywide Financial Corporation claiming that Countrywide engaged in unfair and deceptive trade practices because 1) Countrywide failed to follow the procedures for qualifying borrowers as reported on its filing with the Securities and Exchange Commission and 2) Countrywide hid any potentially negative effects of "teaser" loans, including rising rates, prepayment penalties and negative amortization.
FDUTPA can be a powerful weapon. However, it will not apply to all lenders. Under Section 212, FDUTPA does not apply to banks and savings and loan associations regulated by the Office of Financial Regulation of the Financial Services Commission, banks or savings and loan associations regulated by federal agencies and certain causes of action pertaining to commercial real property.
Application of FDUTPA and other mortgage related statutes is complex. The facts of each case are important. Most statutes contain time limits for raising claims. I urge you to discuss your case with an experienced attorney as soon as possible.