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CHEVY CHASE LAWSUIT - PLAINTIFFS' WIN CASE AND CLASS CERTIFIED
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The Law firm of Demet & Demet has won a victory in a Class Action Lawsuit Involving Chevy Chase Bank, FSB Wherein the Court Determined on Summary Judgment that Several Thousand Option ARM Loans Must Be Rescinded by the Bank.  The Borrowers will recover all of funds that they have paid to the bank and their closing costs.

MILWAUKEE JOURNAL SENTINEL
 
 

Bank loses lawsuit

Loan terms fooled Cedarburg couple

By PAUL GORES
pgores@journalsentinel.com
Posted: Jan. 16, 2007

A federal judge in Milwaukee ruled Tuesday that a Cedarburg couple can rescind their adjustable-rate mortgage with Chevy Chase Bank because the bank failed to clearly explain how the loans would work.

U.S. District Judge Lynn Adelman also certified the case as a class-action lawsuit, creating the possibility that others with similar "option ARM" loans from the Bethesda, Md.-based bank can get out of their mortgages.

People who took out the loans will be able to get back closing costs and the payments they made to the bank, said Milwaukee attorney Kevin J. Demet, who represented homeowners Susan and Bryan Andrews of Cedarburg in the case.

"The significance of the ruling, of course, is that all of their documents became invalid because they didn't make the proper disclosures," Demet said.

David Cynamon, a Washington, D.C., attorney representing Chevy Chase Bank, said he couldn't comment Tuesday afternoon because he had just received a copy of the decision.

According to Adelman's decision and order document:

When the Andrewses took out a refinance loan of about $190,000 with Chevy Chase Bank in 2004, they believed the interest rate of 1.95% was fixed for five years, as was the $701 minimum monthly payment. However, that rate turned out to be a "teaser" rate that applied only to the first month, and the rate then increased every month. As a result, an "ever-increasing" portion of the minimum monthly payment was needed to cover interest, and the payment itself soon became insufficient to cover interest that accrued.

 

Court tells Bethesda bank to rescind option ARMs

Bloomberg News
Originally published January 19, 2007
A federal judge in Wisconsin ordered Chevy Chase Bank to rescind loans made to some borrowers who took out so-called option adjustable-rate mortgages, The Wall Street Journal reported yesterday.

The ruling was in a case against the Maryland-based bank brought by Susan and Bryan Andrews, who took out an option ARM in the belief that a 1.95 percent introductory rate was fixed for five years. Two months later, they received a statement showing the rate had risen to 4.375 percent, the newspaper said.


 
U.S. District Judge Lynn Adelman ruled that the disclosure statement about the loan terms was confusing. The words "five-year fixed" in the statement referred to minimum payments but not to the interest rate, the Journal reported.

Borrowers affected by the decision will get back any payments to the bank, including closing costs and lawyers' fees, the newspaper said, citing Kevin Demet, the attorney who filed the case.

Chevy Chase's general counsel, Thomas McCormick, told the Journal that the Bethesda-based bank will appeal the judge's ruling.

Calls to McCormick and the bank's investor relations department by Bloomberg News before business hours yesterday weren't immediately returned.

Option ARMs usually carry a low introductory interest rate and give borrowers a range of payment options. In recent years, they've proved attractive for borrowers who want to buy properties they couldn't otherwise afford, the Journal added.

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