“I Just Gave My Bank a Free Loan and Paid for the Priviledge of Doing It:” Equity Accelerator BS

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Susan Knape of Dallas, Texas thought she was doing something smart: paying AHEAD on her mortgage. In fact, if you open your mortgage statement each month, I will bet you the paperwork is right there in the envelope popping out. I’m talking about the equity accelerator programs offered by JP Morgan Chase, Well Fargo, Citibank and many other banks — I see the offers in both my Citibank loans every month. This program is a way, say the banks, for you to be a good citizen and pay off your mortgage early by paying down on the principal. 

“I thought I was so smart and their marketing materials showed me that I would save over $80,000 during the life of the loan – just by dividing my mortgage payment into 2 equal payments each month,” she says.

Well yes, but here’s the catch. Chase withdrew the money from Susan’s bank account twice a month but did not apply it to the loan on the days they withdrew it. In other words, Susan gave Chase an interest-free loan of her money to use. Oh even worse: she paid a fee for the honor of giving Chase her money freely for a few days.

And here’s an even bigger rub: any mortgage holder can pay ahead on their mortgage (unless there is a pre-payment penalty in the mortgage, rare these days, might bubble up if interest rates ever go sky-high) and pay down principle for FREE!!!!

Is this a scam? Well yes, says the law firm of Baron & Bud, who is seeking victims of  equity accelerator programs, preferably in California. Texas law requires homeowners suing over these programs to arbitration or mediation, not lawsuits. Hence Baron & Budd is seeking victims outside of Texas, like in California.

It’s a scam because the bank is using your money, says attorney Ronald Tellis of B&B, for free. The funds should be applied to your mortgage the minute they are received. Banks are fighting for these programs because they are the gift that keeps on giving on cash flow statements. Once they have you signed up, it looks really good on their books.  Interest rates are so low banks are looking t make fees aywhere they can — credit cards, creative programs.

So Baron & Budd are looking for victims of this scam — anyone who has signed up for one of these programs, please email B&B and tell all. What they did to you, you poor, poor dear!

Here’s the Baron & Bud press release:

Baron & Budd, P.C. Investigating Mortgage Equity Accelerator Scams Perpetuated by JP Morgan Chase, Citibank

Scam Could Be Cheating California Homeowners Out Of Thousands

LOS ANGELES (August XX, 2011) –The national law firm of Baron and Budd is investigating a possible mortgage scam known as the Equity Accelerator Program, a popular program offered by JP Morgan Chase, Citibank, Wells Fargo and numerous other banks and mortgage lenders. Promoted as a program that can help save substantial money on a home mortgage, banks are taking advantage of people enrolled in the program by failing to apply funds to the mortgage on the same day they are withdrawn from the customers’ accounts, meaning that consumers are essentially giving the bank a loan without their knowledge –and ultimately saving no money on their home mortgage.

“When a bank engages in unauthorized practices with your money, it’s fraud. Banks are completely misrepresenting their mortgage equity accelerator programs to consumers, claiming they can save money when they really are not,” said Roland Tellis, Baron and Budd shareholder and head of the firm’s consumer fraud litigation section. “These banks even charge a fee to participate in this ‘money saving’ service, meaning that you are not only not giving the bank a loan without your knowledge or consent, but they are charging you extra to do it.”

While consumers can save money on interest by making mortgage payments on principal balances sooner, the accelerator program promises consumers big savings by using electronic money transfers to make mortgage payments twice a month.  During the period between withdrawal and application of funds to the mortgage, homeowners are essentially making a loan to the bank without their knowledge or permission.

If you are a California mortgage holder and are enrolled in a mortgage equity accelerator program through Chase Bank or another mortgage lender, you may be eligible for a class action lawsuit. Call Baron and Budd at 1.866.656.2425 or email [email protected] to learn more. There is no upfront cost for the firm’s investigation of potential mortgage fraud. At this time, Baron and Budd is only able to assist mortgage holders in the state of California.

Recognized as a top national plaintiffs’ law firm, Baron and Budd is dedicated to defending the rights of consumers. The firm currently serves on the Plaintiffs’ Steering Committee in the bank overdraft fee litigation and is actively pursing a number of online companies that have scammed consumers with fraudulent credit card charges and misleading rewards programs.

 
 

Candy Evans, founder and publisher of CandysDirt.com, is one of the nation’s leading real estate reporters.

18 Comments

  1. Peterk on August 31, 2011 at 12:38 am

    wonder how much the law firm will make off of this lawsuit? and what will the plaintiffs get? a coupon?

  2. Peterk on August 31, 2011 at 12:38 am

    wonder how much the law firm will make off of this lawsuit? and what will the plaintiffs get? a coupon?

  3. Candy Evans on August 31, 2011 at 12:50 am

    I agree. In fact, I am so sick of all those class action lawsuits against investment deals you open them up, hunt down the paperwork, and then you get like not even a Starbucks latte. I now toss them. But! I explained this to Roland and he reminded me that this does help end the "bad behavior". Good point. Also, I wonder if this might pop up in the Perry campaign as he touts business-friendly Texas which is business cheap because of these tort issues.

  4. Candy Evans on August 31, 2011 at 12:50 am

    I agree. In fact, I am so sick of all those class action lawsuits against investment deals you open them up, hunt down the paperwork, and then you get like not even a Starbucks latte. I now toss them. But! I explained this to Roland and he reminded me that this does help end the "bad behavior". Good point. Also, I wonder if this might pop up in the Perry campaign as he touts business-friendly Texas which is business cheap because of these tort issues.

  5. Lisa Richards on August 31, 2011 at 9:17 am

    The correct word for the base amount of a loan upon which interest is charged is "principal." A "principle" is a concept or belief.

  6. Lisa Richards on August 31, 2011 at 9:17 am

    The correct word for the base amount of a loan upon which interest is charged is "principal." A "principle" is a concept or belief.

  7. Susan Knape on August 31, 2011 at 11:29 am

    Well the law firm only gets paid if the class action actually takes off and then the court decides how much everyone gets. There are plenty of times law firms end up in the red on these. Plus class actions, while a pain to fill out those papers, are really the only tool we (quasi normal Americans) have to change corporate behavior. So even though they are not necessarily $ making for plaintiffs, they are game changing (in a good way) for us all. Just look at how BofA got their act together on overdraft fees after that class action …

  8. Susan Knape on August 31, 2011 at 11:29 am

    Well the law firm only gets paid if the class action actually takes off and then the court decides how much everyone gets. There are plenty of times law firms end up in the red on these. Plus class actions, while a pain to fill out those papers, are really the only tool we (quasi normal Americans) have to change corporate behavior. So even though they are not necessarily $ making for plaintiffs, they are game changing (in a good way) for us all. Just look at how BofA got their act together on overdraft fees after that class action …

  9. Candy Evans on August 31, 2011 at 12:42 pm

    @Lisa, thanks so much. I should just give a copy editor my left kidney. Will get it changed and keep on watching out for me!

  10. Candy Evans on August 31, 2011 at 12:42 pm

    @Lisa, thanks so much. I should just give a copy editor my left kidney. Will get it changed and keep on watching out for me!

  11. Richard Woodward on August 31, 2011 at 3:20 pm

    I am so glad someone is actually exposing this scam. My clients ask me about this all the time. I always ask them -Why pay for something you can do yourself? Just one note -if you do plan to pay 1/2 a payment every two weeks, make sure to pay the first 1/2 in advance. If don't you could possibly make your FULL payment late and incur late fees.

    • Robert Lowery on August 31, 2011 at 7:17 pm

      Good point Richard.

      • Robert Lowery on August 31, 2011 at 7:26 pm

        Read the fine print of your mortgage paperwork before signing anything. In theory you can find out how your payments will be applied. The nice thing about paying every two weeks, or even every four weeks, is that you will make extra payments throughout the year 26 or 13. But you must be consistent. Paying late will cost you additional interest. Thus, instead of paying $500.00 with $400.00 going to interest and $100.00 going to principal, you are paying $500.00 with $405.00 going to interest and $95.00 to principal (please excuse the bad math). Also, ask how principal payments are applied. The consumer must be aware and diligent. . .not every company is alike.

  12. Richard Woodward on August 31, 2011 at 3:20 pm

    I am so glad someone is actually exposing this scam. My clients ask me about this all the time. I always ask them -Why pay for something you can do yourself? Just one note -if you do plan to pay 1/2 a payment every two weeks, make sure to pay the first 1/2 in advance. If don't you could possibly make your FULL payment late and incur late fees.

    • Robert Lowery on August 31, 2011 at 7:17 pm

      Good point Richard.

      • Robert Lowery on August 31, 2011 at 7:26 pm

        Read the fine print of your mortgage paperwork before signing anything. In theory you can find out how your payments will be applied. The nice thing about paying every two weeks, or even every four weeks, is that you will make extra payments throughout the year 26 or 13. But you must be consistent. Paying late will cost you additional interest. Thus, instead of paying $500.00 with $400.00 going to interest and $100.00 going to principal, you are paying $500.00 with $405.00 going to interest and $95.00 to principal (please excuse the bad math). Also, ask how principal payments are applied. The consumer must be aware and diligent. . .not every company is alike.

  13. proxy on August 28, 2012 at 6:41 am

    Hi there, i read your blog occasionally and i own a similar one and i was just curious if you get a lot of spam comments? If so how do you reduce it, any plugin or anything you can suggest? I get so much lately it’s driving me insane so any help is very much appreciated.

  14. proxy on August 28, 2012 at 6:41 am

    Hi there, i read your blog occasionally and i own a similar one and i was just curious if you get a lot of spam comments? If so how do you reduce it, any plugin or anything you can suggest? I get so much lately it’s driving me insane so any help is very much appreciated.

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