A group of homeowners filed a class action lawsuit against the largest homebuilding company in the United States and its mortgage lending subsidiary over money they lost in an alleged deceptive mortgage scheme.
D.R. Horton and DHI Mortgage targeted prospective homebuyers with affordable monthly payment plans, but the company low-balled the true costs and excluded most of the required property taxes, according to the lawsuit.
“The lawsuit alleges that D.R. Horton and DHI Mortgage were running a ‘monthly payment suppression scheme’ to mislead first-time homebuyers into thinking their total monthly housing costs would fit their budgets,” said Jennifer Wagner, senior attorney at the National Consumer Law Center, in a press release Wednesday. “They preyed on people’s faith in the American Dream of homeownership to lure them into unaffordable, deceptive deals.”
Many buyers didn’t know their payments would be up to nearly $1,000 higher each month until after they had closed on their homes and their loans were sold to a new mortgage servicer, the plaintiffs said.
“The lawsuit claims that the home builder and its mortgage company were working together from their initial sales pitch to deceive buyers into closing on homes and mortgages by presenting artificially low monthly payments, leading to payment shock,” said Jeffrey Newsome, attorney at Varnell & Warwick, which represents the group of homeowners with Varnell & Warwick, P.A. and the NCLC.
One of the five plaintiffs, Frankie Santiago, was promised a monthly payment of just over $2,100 for a home in Lake County, Florida, and thus chose D.R. Horton and its subsidiary, which ranked 12th in total originations in 2023, because the monthly payment was lower than homes with a similar sales price.
It wasn’t until almost a year later that Santiago found out he would have to pay roughly $1,000 more per month, as the new servicer conducted an escrow analysis that included all of the property taxes and the money he now had to cover for back taxes.
The lawsuit, filed in U.S. District Court for the Middle District of Florida, seeks to stop the companies from tricking future homebuyers and recoup all money the homeowners lost. Homeowners may be entitled to three times their out-of-pocket losses under the Racketeer Influenced and Corrupt Organizations Act (RICO).
“Our goal in bringing this class action lawsuit is to recover damages for the many people around the country who’ve been cheated and to prevent future homeowners from being lured into this predatory scheme,” said Kristen Simplicio, partner at Clarkson Law Firm.
