January 19, 2007
The Option ARM Litigation
A Maryland bank, Chevy Chase Bank, must rescind loans made to borrowers who took out "option adjustable-rate mortgages." The federal district court in the Eastern District of Wisconsin held that the option ARMs violated the Federal Truth in Lending Act. At issue is whether anyone can understand the loan contract. It is yet another example of over-lawyering on contracts and disclosure statements. The documents are long, technical, understood by a very few, and, probably, once one gets a seminar on the language, technically correct. The defendants answer? The judge did not understand the loan contract. Choice.
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