Millions of homeowners have signed up for a forbearance under the CARES Act, which gives homeowners with a federally-backed mortgage loan the right to obtain a temporary reduction or suspension of mortgage payments by way of a forbearance.  During the forbearance period, the financial institution cannot charge fees, penalties, or interest beyond the amounts included as part of the homeowners’ regular monthly mortgage payments. A new putative class action asserts that one bank, however, is doing just that.

PNC Bank customers recently filed a class action against the bank in federal court in Maryland concerning the bank’s handling of forbearances granted pursuant to a Fannie Mae COVID-19 payment deferral agreement. The plaintiffs accused the bank of breaching its deferral agreements, which provided homeowners extra time to make mortgage payments during the pandemic.

According to the plaintiffs, the bank agreed to bring their mortgages current and delay any repayment obligation for missed monthly mortgage payments without the borrowers accruing any interest or penalties. Customers would not be responsible for past-due amounts until the earlier of the maturity date of the mortgage, sale of the mortgaged property, or the payoff or refinance of the mortgage loan. The plaintiffs allege that the bank breached its agreement by adding the total past due payments to the outstanding principal balance on the loan, effectively double-charging the plaintiffs and improperly increasing the amount of their mortgages. The plaintiffs also claim violations of the Truth-In-Lending Act, alleging that mortgage statements PNC sent to its customers included inaccurate principal balances and did not disclose the existence of prepayment penalties for deferred amounts paid off early. Further, the plaintiffs allege violation of the Maryland Consumer Protection Act, which prohibits unfair and deceptive trade practices in the extension of consumer credit and/or collection of consumer debts. The putative class alleges, among other things, that PNC misrepresented the application of the deferred payments and failed to disclose additional interest charges. The class representatives, in their individual capacities, also assert a claim for violation of the Real Estate Settlement Practices Act (“RESPA”) based on the bank’s alleged failure to appropriately respond to the plaintiffs’ written notices about their mortgage account.

The lawsuit seeks declaratory and injunctive relief, actual damages, restitution, and statutory damages under the Fair Lending statutes, and also request that their attorneys’ fees be assessed against the bank.

There has been a great deal of focus since the COVID-19 pandemic began on forbearance requirements. There has been less scrutiny to date in courts on whether financial institutions are heeding the specific details of the mandated forbearance periods. The putative class action filed against PNC may herald a coming wave of legal actions asserting non-compliance with those key details.