In breaking real estate borrowing news, the “Interest Minimizer” mortgage program touted as “one of the greatest financial secrets of our time” promising to save borrowers thousands in mortgage interest is in hot water with the Consumer Financial Protection Bureau (CFPB) for misleading consumers and making false promises.
Federal lawsuit filed
The May 11th filing named the program, offered by Nationwide, its subsidiary Loan Payment Administration, and Daniel Lipsky, founder/president/officer/owner, on behalf of 10,000 California consumers enrolled in the program.
It just doesn’t add up
Consumers enrolled in the program send half their monthly mortgage payment every two weeks, making an additional monthly payment annually. However Nationwide charges the participants a setup fee of up to $995, then a $3.50 biweekly processing fee. The CFPB alleges consumers end up paying more in fees than they save in interest for several years. Only about a quarter of consumers have been enrolled longer than 4 years. Worse yet, some leave the program without having saved any money at all. Nationwide, however, collected about $49 million in setup fees.
A sad example
CFPB example demonstrates for a 30-year fixed-rate mortgage on a $160,204 loan with 4.125% interest, a consumer would not save enough to recoup fees paid to Nationwide until nine years into the program. Monthly interest savings wouldn’t be realized until 14 years – more than 20 years to realize half the savings promised.
- Allegations of ““immediate” savings that take years to achieve.
- False promises of savings without paying more.
- Misleading costs, specifically setup fees.
- Claims of affiliation with mortgage lenders/servicers.
Permanent injunction, restitution, civil money penalties and court costs. Nationwide has yet to respond to the lawsuit. Friends and foes of the mortgage giant will have to stay tuned…
Looking for the latest in real estate borrowing news? Count on PropertiesOnline to keep you out of trouble!