Home owner sues Wells Fargo claiming FHA loan was too costly

Home owner sues Wells Fargo claiming FHA loan was too costly

A woman has filed suit against the bank that issued her a loan, which required her to come up with a substantial down payment and which forced her to pay mortgage insurance of nearly $200 per month.

Christy L. Buchanan alleges she bought a home at 2432 Timber Ridge Rd. in Edwardsville for $350,000 on Nov. 6, 2010. Buchanan, who already had one mortgage, financed her home through Wells Fargo Bank.

Because of Buchanan’s financial situation, Wells Fargo offered her only an FHA loan, according to the complaint filed Dec. 31 in Madison County Circuit Court. However, the maximum amount Buchanan was allowed to borrow under FHA regulations was $282,000, the suit states.

“In reliance upon the false information of loan availability to the plaintiff, she was required to raise over $70,000 in cash for the down payment. With the full knowledge of the defendant through its local staff, the plaintiff cashed in her 401(k) plan at her employer which then had a balance in excess of $79,957,” the complaint says. “The plaintiff had a penalty of 10% in cashing these funds.”

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