LoanCare faces amended class action over prepayments

Mortgage borrowers have filed an amended class action lawsuit related to the way a subservicer reportedly handled their prepayments following a court's partial denial and dismissal of their earlier court filing.

The new U.S. District Court filing alleges nonbank LoanCare misapplied funds and charged unnecessary interest while aiming to address concerns about a lack of specificity in the earlier one. Virginia Lawyers Daily and Casetext reported on the case earlier.

At issue in the amended lawsuit that plaintiffs Gary and Lisa Tederick filed are 16 prepayments of $300 to $1,500 each that LoanCare handled for a mortgage on their home in West Virginia after it began working with their servicer, RoundPoint, starting "on or around" April 1, 2019.

The handling of the funds was out of step with servicing rules for their Fannie Mae loan, under which amounts prepaid should be put "immediately" toward reducing unpaid principal and prior to applying the regular monthly obligation rather than in the opposite order, the plaintiffs alleged.

The Tedericks filed the suit in Virginia's Eastern District based on the location of the defendant's principal place of business. LoanCare LLC is based in Virginia Beach.

Misapplication of prepayments began prior to LoanCare's responsibility for the subservicing, and plaintiffs allege that after informing the company of that concern, a representative identified as "Tiffany" told them the problem had been corrected.

"LoanCare not only failed to correct the Tedericks' account, but it also continued to apply the Tedericks' prepayments in the incorrect order," the plaintiffs said in the filing, which concerns payments made between May 2019 and August 2020.

The plaintiffs alleged LoanCare violated prohibitions in the West Virginia Consumer Credit and Protection Act related to fraud by doing this.

Allegations related to violations of prohibitions on using "unfair and unconscionable" methods of debt collection and "unjust enrichment" were respectively denied and dismissed in the earlier complaint. The new filing revives them and makes efforts to address previous court concerns.

LoanCare had not responded to the amended complaint at the time of this writing.