ATLANTA — A Channel 2 Action News investigation found millions of homeowners could end up paying hundreds of millions of dollars in extra interest on loans they've already paid off.
Consumer investigator Jim Strickland learned Georgia is the battleground as borrowers fight the charges and their banks.
A townhome in Summer Hill in southeast Atlanta is at the center of the fight.
The woman who sold it claims her lender broke the rules and she paid for it.
"They had commercials and, you know, I was young," Kristen Rogers told Strickland.
Rogers admits she was swayed by her lender's advertising. A current television campaign touts the fast and easy "Rocket Mortgage" from Quicken Loans.
Quicken is also the nation's number one volume Federal Housing Administration lender. FHA loans are insured by the government and designed for first-time buyers like Rogers.
"Every penny counts. When you are in your twenties, every penny counts," Rogers said.
The issue isn't what happened when she took out the loan. It's what happened when she sold the home and paid it off.
That was June 4, 2014. Quicken had its money but charged her interest through July 1, 2014.
That amounted to $235 extra on a mortgage paid in full.
Had Rogers closed on June 1 there would have been no penalty.
Strickland asked Rogers if she remembered receiving any disclosure that if she paid three days earlier she could have saved money.
"No, not at all," Rogers replied.
The charge is called post payment interest. It's an FHA exclusive. The government banned it on new loans starting in 2015.
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It's still allowed on 4.8 million mortgages still on the books but a lender must warn you.
"It needs to be blatantly simple. If you don't close on the first of the month, we're going to charge you an entire month's interest regardless of the day you close," Roger's attorney, Mike Werner, told Strickland.
Rogers potentially represents thousands of loan clients in the lawsuit that charges Quicken Loans didn't follow the disclosure rules.
"I'm sure that many of your viewers have been caught up in this," Werner said.
"The lenders want the money. They argue they're entitled to the money," Emory law professor Frank Alexander told Strickland.
Alexander said relatively small extra payments like Rogers' will add up.
"You're looking at hundreds of millions of dollars in excess charges right now," Alexander said.
Figures obtained from the Federal Housing Administration show in the last five years in which post-payment interest was allowed, FHA insured 225,000 loans in Georgia alone. Those loans total $32 billion. Even if only half were hit with a $500 post-payment charge, that would amount to $56 million.
Quicken wrote more than 10,000 FHA loans in Georgia during that period, worth $1.5 billion.
Strickland alerted Quicken Loans to the suit even before it was filed.
They denied an on-camera interview but issued a statement:
We are unaware of any lawsuit that has been filed involving our company related to the claim raised in the draft complaint provided to us by Jim Strickland at WSB-TV in Atlanta. Should a hypothetical lawsuit be filed with identical or similar claims to the ones included in the complaint provided by Mr. Strickland, these claims would be misguided, frivolous and without merit.
Quicken Loans' record of compliance with all FHA rules and regulations is the gold standard of the program. From our nationally leading delinquency rates (which are the lowest in the country), to our underwriting standards, client service (including 10 J.D. Power awards) and every guideline in between, Quicken Loans leads the nation in its impeccable adherence to these vast array of regulations.
As has been our philosophy and strategy for our 32 years of lending to American homeowners, we will defend any and all lawsuits by predatory plaintiff attorneys who attempt to extract a windfall settlement for baseless claims regardless of the expense or time involved to defend against this kind of egregious abuse of the United States legal system.
"We have to see how frequently the banks are willing to say, 'Yep, we blew it,'" Alexander said.
In fact, Bank of America, Wells Fargo, SunTrust and U.S. Bank have already settled similar cases.
Sources tell Strickland that Bank of America paid $29 million.
Rogers moved to Florida where she's rented for three years. She's soured on the whole mortgage process.
"You just kind of feel alone. You kind of feel like you are in a pool of sharks," Rogers said.