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22,000 Virginia borrowers cleared to join lawsuit in PNC case

| Thursday, Aug. 1, 2013, 12:01 a.m.

About 22,000 borrowers who claim a Virginia bank conspired to defraud them on secondary home loans between 1998 and 2002 can jointly pursue a claim of more than $1 billion in damages against PNC Bank, a federal judge ruled Wednesday.

The case centers on the dealings of Community Bank of Northern Virginia, which was based in Sterling, Va. PNC assumed the liability for the class-action lawsuit when it bought Mercantile Bankshares Corp. in 2006, a year after that Baltimore-based bank bought Community Bank.

The 3rd U.S. Circuit Court of Appeals in 2005 and 2010 overturned proposed settlements in the case based on objections from substantial numbers of the affected borrowers.

In the 2010 ruling, the appellate court noted that the proposed $47.6 million settlement would provide each of about 44,000 borrowers about $250 to $925 on claims that were at least an average $14,000.

Lawyers for the borrowers objecting to the settlement said the average claim was closer to $67,000 and the overall liability was more than $3 billion.

U.S. District Judge Arthur Schwab in his ruling Wednesday didn't provide a claims estimate but noted that he was approving a class with about 22,000 members.

Lawyers for the plaintiffs and PNC and a bank spokesman couldn't be reached for comment.

The plaintiffs claim in the case that Community Bank conspired with a mortgage broker firm that sent out direct mailings seeking people who wanted to take out a second mortgage. The firm referred the borrowers to the bank, the lawsuit says.

The bank acted as if it handled the loans, but it kicked back most of the loan-related fees to the brokerage firm, the lawsuit says. The bank charged the borrowers excessive fees and, in some cases, fees for services it didn't provide, the lawsuit says.

The decision comes as PNC is trying to recover from a painful but unrelated chapter in the housing crisis.

PNC was among the nation's 13 largest banks that in April started paying claims to millions of people who may have been wrongfully foreclosed on during the crisis.

The banks agreed to pay a total $9.3 billion in cash and mortgage balance reductions to settle actions by the Federal Reserve and the U.S. Comptroller of the Currency over “robo-signing,” the automatic signing of foreclosures without proper review of each mortgage's documents.

PNC's share was $69.4 million for the settlement fund and another $111 million for loss-mitigation and other foreclosure-prevention measures.

Brian Bowling is a staff writer for Trib Total Media. He can be reached at 412-325-4301 or bbowling@tribweb.com.

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