Kansas City, MO: (Jun-21-07) A class action lawsuit was filed against NovaStar Mortgage Inc. in December 2005 in the US District Court for the Western District of Washington, alleging that the company had pushed clients into paying higher interest rates due to hidden fees. The class comprised of 1,600 members. The suit claimed that brokers securing the loans for NovaStar Mortgage, a subsidiary of NovaStar Financial Inc., a Kansas City-based sub prime mortgage lender, were paid yield spread premiums for referring loans at a higher interest rate than what the client otherwise would be charged for the loan. The suit alleged that the broker and the lender did not disclose the additional payment to the borrowers until they arrived to sign the final closing documents. This gave the clients little or no time to negotiate a better rate.
As part of the settlement reached, NovaStar Mortgage agreed to pay $5.1 million to end the class action litigation. The settlement includes $3.3 million to compensate the 1,600 members of the class and $1.8 million to cover the plaintiffs' attorney fees. The average award was $2,011 per plaintiff. [SAN ANTONIO BUSINESS JOURNAL: MORTGAGE FRAUD]
