LoanCare Improper Escrow of Water Quality Fees Class Action

LoanCare, LLC is a mortgage servicing company. Like many mortgage servicers, it collects additional funds for things like taxes on the mortgaged property, which it holds in an escrow account until payment comes due. But the complaint for this class action alleges that it should not be collecting water quality fees in this same manner.

LoanCare collects certain “escrow items” that are held in the escrow account. The complaint quotes a Deed of Trust section entitled “Funds for Escrow Items” as saying the following: “Borrower shall pay to Lender on the day Periodic Payments are due … a sum … to provide for payment of amounts due for: (a) taxes and assessments and other items which can attain priority over this Security Instrument as a lien or encumbrance on the property…”

In other words, the lender takes control of payments of things like taxes, because if taxes are not paid, the tax authorities might put a lien on the property, causing the lender to lose priority if the property must be sold.

The plaintiff in this case, Ronald Landers, lives in a municipality that charges water quality fees, and LoanCare has been collecting these fees from Landers as part of his mortgage payment.

However, the complaint claims that these fees have been found to be a user fee and not a tax: “The Office of the Attorney General of the State of Tennessee has issued a written opinion stating that Water Quality Fees ‘[are] not a tax on real property’ and that municipalities cannot place a lien on a property for failure to pay the Water Quality Fee.”

Despite this, the complaint alleges, LoanCare has been requiring that borrowers pay these fees as part of their mortgage payment, to be put into the escrow account, “imposing these fees as an escrow requirement, and improperly inflating the amount of money that [borrowers] must place in their escrow account[s] for years, collecting interest on the excess funds and converting funds that should be in the hands of borrowers whose loans are serviced by LoanCare.”

On March 19, 2020, Landers sent a Notice of Error letter to LoanCare through his counsel. LoanCare responded that the collection of the fee for the escrow account was not an error.

The complaint alleges that LoanCare’s insistence on getting the water quality fee has resulted in incorrect escrow balances and the misapplication of payments, resulting in improper late fees and improper credit reporting on Landers.

The counts include tortious interference with contract, among other things.

The class for this action is all individuals in the US

  • For whom LoanCare services a residential mortgage loan secured by residential property in Tennessee
  • Whose mortgage contains Uniform Paragraph 3 of the Fannie/Freddie Uniform Mortgage
  • Where the residence securing the mortgage loan is located in a municipality in Tennessee where there is a water quality fee, and
  • For whom LoanCare paid a water quality fee as an escrow item.
Article Type: Lawsuit
Topic: Loans

Most Recent Case Event

LoanCare Improper Escrow of Water Quality Fees Complaint

September 30, 2020

LoanCare, LLC is a mortgage servicing company. Like many mortgage servicers, it collects additional funds for things like taxes on the mortgaged property, which it holds in an escrow account until payment comes due. But the complaint for this class action alleges that it should not be collecting water quality fees in this same manner.

LoanCare Improper Escrow of Water Quality Fees Complaint

Case Event History

LoanCare Improper Escrow of Water Quality Fees Complaint

September 30, 2020

LoanCare, LLC is a mortgage servicing company. Like many mortgage servicers, it collects additional funds for things like taxes on the mortgaged property, which it holds in an escrow account until payment comes due. But the complaint for this class action alleges that it should not be collecting water quality fees in this same manner.

LoanCare Improper Escrow of Water Quality Fees Complaint
Tags: Mortgage-Related Unfair Practices, Servicing Your Mortgage