Homebuyers sue D.R. Horton, DHI Mortgage for alleged deceptive lending

A group of homebuyers has filed a class action lawsuit against D.R. Horton, the nation’s largest homebuilding company, and its mortgage lending subsidiary, DHI Mortgage Co., alleging that the companies engaged in deceptive home-selling and mortgage practices that left buyers with unexpectedly high monthly payments.

The lawsuit — filed Oct. 1 in the U.S. District Court for the Middle District of Florida — is being led by Varnell & Warwick, P.A., Clarkson Law Firm, P.C., and the National Consumer Law Center (NCLC).

Plaintiffs aim to stop what they describe as a predatory scheme that encouraged homebuyers to purchase more expensive homes with larger mortgages.

Litigation also seeks to recover all financial losses for affected homeowners. Under the Racketeer Influenced and Corrupt Organizations (RICO) Act, homeowners could be entitled to triple their out-of-pocket losses, the National Consumer Law Center said.

Plaintiffs say the firms “significantly understated the true costs of homeownership”

According to the complaint, D.R. Horton and DHI Mortgage allegedly misled prospective homebuyers by advertising low monthly payments that excluded the majority of required property taxes — significantly understating the true costs of homeownership.

“The lawsuit alleges that D.R. Horton and DHI Mortgage were running a ‘Monthly Payment Suppression Scheme’ to mislead first-time homebuyers into thinking their total monthly housing costs would fit their budgets,” said Jennifer Wagner, senior attorney at the National Consumer Law Center. “They preyed on people’s faith in the American Dream of homeownership to lure them into unaffordable, deceptive deals.”

Many homeowners allegedly did not discover the true cost of their mortgages until after closing, when DHI Mortgage sold their loans to new servicers who recalculated escrow accounts to include the full property tax amounts.

“The lawsuit claims that the homebuilder and its mortgage company were working together from their initial sales pitch to deceive buyers into closing on homes and mortgages by presenting artificially low monthly payments, leading to payment shock,” said Jeffrey Newsome, attorney at Varnell & Warwick.

One plaintiff, Frankie Santiago, was told his monthly payment for a D.R. Horton home in Lake County, Fla., would be $2,164.68. Based on that figure, he selected the home and mortgage offered by DHI Mortgage, believing it was the most affordable option, the complaint said.

But less than a year after closing, his new mortgage servicer conducted an escrow analysis that included full property taxes and back payments — raising his monthly payment by nearly $1,000 to $3,136.33.

“Our goal in bringing this class action lawsuit is to recover damages for the many people around the country who’ve been cheated and to prevent future homeowners from being lured into this predatory scheme,” said Kristen Simplicio, partner at Clarkson Law Firm.