Rocket Mortgage LLC and Charles Schwab Bank SSB have been hit with a lawsuit alleging violations of the Truth in Lending Act related to mortgage disclosures.
Franz Bunnell filed the class-action lawsuit Wednesday in the U.S. District Court for the Southern District of Texas in Houston against the two financial institutions, claiming they provided false or misleading information about whether new buyers could assume mortgages.
The complaint names Rocket Mortgage, formerly known as Quicken Loans, and Charles Schwab Bank as defendants. Bunnell is seeking to stand in for all customers similarly affected by the alleged violations.
The case centers on federal requirements that lenders disclose whether home loans are assumable, a feature that allows a buyer to take over a seller’s existing mortgage terms.
“We have been made aware of the lawsuit.” according to a statement from Charles Schwab. “We are confident that our practices meet the highest standards and will respond to the claims in court.”
Rocket Mortgage also issued a statement: “Rocket Mortgage followed all applicable laws and regulations in our documentation and home loan process. We are confident that this case will be quickly dismissed.”
“This is just kind of an enforcement mechanism to keep mortgage companies from giving inaccurate statements to their lenders,” said the plaintiff’s lawyer, Scott M. Clearman, from the Clearman Law Firm in Houston.
The plaintiff seeks statutory damages, attorney fees, and costs for the proposed class of consumers. Statutory damages for the class are capped at the lesser of $1 million or one percent of the defendant’s net worth.
The proposed class would include all individuals in the U.S. who obtained a mortgage loan from Rocket Mortgage with disclosures stating the loan was assumable, which was later sold or transferred to Charles Schwab Bank.
The case began when Brunnell and his son, Zack Brunnell, obtained a mortgage from Rocket Mortgage, which was disclosed as assumable. On April 23, 2024, when Zack attempted to sell his home and have the mortgage assumed, Rocket Mortgage denied the assumption based on Charles Schwab guidelines. Brunnell claims the disclosures provided by Rocket Mortgage were misleading as the loan was not assumable under any conditions.
Rocket Mortgage’s defense, as stated in a June 20, 2024, letter to the Department of Savings and Mortgage Lending in Texas, clarified that the closing disclosure “does not provide a guarantee that an assumption loan will be possible, but that it would be allowed by the Lender so long as certain conditions are met.”
The Rocket Mortgage letter stated, “While we sincerely apologize if Mr. Bunnell felt the verbiage on the Closing Disclosure was ambiguous, we do not agree with his assertions that he was promised or guaranteed the loan would be assumable post-close. The Closing Disclosure clearly states that an assumption may be permitted under certain conditions, and the condition of investor approval was not met for his loan.”
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