By Dolores Kong
The Boston Globe

A Milton man had been making his mortgage payments on
time when out of the blue, he got a letter from the
lender saying he needed to pay an additional $4,000 or
his home would be foreclosed.

"The bank was saying I had late charges," said the
retired police officer, 56, who did not want to be
named. "They keep on playing games with me. I can't
sleep at night. All my bills are up to date."

He sought the services of Marie McDonnell, owner of
the Mortgage Counselor in Orleans, who'd helped him
with a similar problem with his mortgage before. She's
found that some payments apparently had not been
properly credited, among other errors.

"I have many cases where banks created a delinquency,"
said McDonnell, among a small but growing number of
so-called mortgage auditors, who for a fee analyze
loan documents and payment history for errors or
truth-in-lending violations.

Under little-known and poorly understood consumer
protection statutes, homeowners have certain legal
rights if they can document an error or violation -
and they may even have a defense against foreclosure -
particularly if the mistakes occurred on a refinanced
mortgage or home equity loan.

While there are no hard statistics on the rate of loan
errors, they are more common than consumers realize.
For instance, in 1998, the Federal Deposit Insurance
Corp. required 161 banks to reimburse more than $1
million to more than 30,000 consumers for violations
of the federal Truth in Lending Act, according to the
latest statistics. And last year, the Massachusetts
Division of Banks required the reimbursement of
$738,000 to 778 consumers for TILA violations.

Some consumer law attorneys and mortgage auditors
estimate between 30 and 80 percent of mortgages have
some kind of mistake - whether in interest rate
calculations, escrow amounts, or TILA violations.

"I find TILA violations about one-third of the time,"
said Gary Klein, an attorney with Boston law firm
Grant & Roddy, and formerly a senior attorney with the
National Consumer Law Center who argued a high-profile
case based on such a violation, to help keep a
Westport woman from being foreclosed upon.

Mortgage lenders dispute those estimates, saying any
errors are minimal, considering that more than $1
trillion in mortgages are written across the country
every year.

"We don't want borrowers to be overcharged," said Bud
Carter, senior director of residential finance for the
Mortgage Bankers Association of America, which has a
mortgage reform plan to simplify and make more easily
understood the TILA disclosures for consumers.
"Obviously, when those mistakes are made, I think most
lenders will make those refunds when required to do

That's easier said than done, say some borrowers,
consumer law attorneys and mortgage auditors. Even
when an error is documented and brought to the
attention of the lender, it can take consumers a lot
of time and money to assert their rights.

In the Milton man's case, McDonnell first had found
improper crediting of payments and other mistakes on
his mortgage a few years ago. Her client hired an
attorney and got the lender to agree to modify the
loan and reduce the payments. But now, with mistakes
continuing to go on with the modified loan, McDonnell
said the man may have to consult an attorney again.

"They just can't get this right," said McDonnell, as
she looked at the 14 pages of spreadsheet analysis she
did on the man's mortgage, documenting payment
history, escrow balance and other factors.

McDonnell, whose fees start at $175 and go up
depending upon the complexity of the case, helped to
uncover in the early 1990s a Dime Savings Bank
mortgage scheme affecting thousands of New England
homeowners, a third of whom were in foreclosure.
Boston attorneys Richard Askenase and John F. Cullen
are trying to help a Saugus couple facing foreclosure
as a result of illness and loss of income, and
recently reviewed their mortgage documents.

"We found a variety of errors, some in calculation,
some in document preparation, some in inappropriate
charges," said Askenase. But "litigation was not a
realistic option for them" because of the cost, so two
weeks ago, Askenase helped the couple file for
Cullen won a potentially precedent-setting case that
prevented foreclosure on his paralegal's home, based
on TILA violations. But Cullen said it took him three
years and about $386,000 worth of donated legal time
to help his former paralegal.

Another homeowner facing foreclosure, Roxbury resident
Carl Erickson, also has been trying to assert his
legal rights, based on a mortgage audit by McDonnell
showing a $90,000 overcharge over the life of his
loan. A week ago, just before the foreclosure auction,
the former Dudley Square redevelopment activist filed
bankruptcy, continuing the six-year legal battle that
he blames for the tens of thousands of dollars of
other debt that is documented in the records.

As difficult as the legal rights may be to assert,
consumer law attorneys, regulators and mortgage
auditors point to some of the key consumer protection
provisions, which apply to mortgage refinance or home
equity loans, but not mortgages to purchase homes.
Failure to make the proper TILA disclosures gives
consumers the right to rescind the loan within a given
statute of limitations (four years in Massachusetts).
Consumers also have the right to back out within three
days of signing the paperwork, even if disclosures
were properly made.

Any TILA violations that date back more than four
years may be used as a defense against foreclosure in
Massachusetts, under a principle known as rescission
by recoupment.

Borrowers with concerns about possible TILA violations
in a loan they got from a mortgage company or
state-chartered bank or credit union can contact the
state Division of Banks' consumer assistance office,
although the state will not get involved if the
consumer has hired an attorney, according to Steven
Antonakes, senior deputy commissioner for the
division. Consumers can call the consumer assistance
office at (617) 956-1500, x501, or download a
complaint form from, fill
it out and mail it to Consumer Assistance Office,
Massachusetts Division of Banks, One South Station,
Boston, MA 02110.

Borrowers who want to download a Windows-based
software program from the US Treasury's Office of the
Comptroller of the Currency, to verify their loan's
annual percentage rate, can go to