Ally Bank, Better Mortgage Fail to ‘Refund the Difference’ in Appraisal Costs as Promised, Class Action Claims

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A proposed class action alleges Ally Bank and Better Mortgage Corp have fallen short of their promise to “refund the difference” between a home loan applicant’s up-front appraisal fee and the actual cost paid for a property appraisal. 

The 27-page lawsuit alleges Ally and Better Mortgage have uniformly failed to “refund the difference,” and instead engaged in the undisclosed practice of deducting from mortgage applicants’ up-front appraisal fee both the actual cost of the home appraisal and an additional, undisclosed “management fee.” From there, the defendants refund only this lower amount, making it appear as though they had refunded the difference to the applicant while never disclosing the hidden “management fee” deducted from the refund amount, the lawsuit alleges. 

“These practices breach Defendants’ promise to pay solely for the cost of the required lender appraisal and refund the difference between that cost and the amount of the ‘Appraisal Fee’ paid by the applicant,” the complaint says, noting consumers never agreed to pay the defendants’ management fee. 

According to the case, the defendants incentivize mortgage applicants to act quickly and pay the appraisal fee by offering the quoted amount “as a carrot to ‘lock in’ the mortgage rate,” often before the application is finalized. The lawsuit alleges that although the defendants call it the “appraisal fee” and tell applicants that they’ll “refund the difference” if the appraisal cost is less than the quoted amount, Ally and Better Mortgage “hide” that they will charge the additional management fee before they issue the refund.

“And thus, they do not ‘refund the difference’ between the paid ‘Appraisal Fee’ and the cost of appraisal,” according to the complaint. “Rather, they issue a refund for the difference between the paid fee and a sum that includes hidden costs never disclosed to or contracted for by the applicant.” 

The lawsuit says the defendants uniformly charge mortgage applicants an appraisal fee of $550, which must be paid in order to obtain the loan. The case claims, however, that Ally and Better Mortgage do not affirmatively provide customers with invoices for the lender appraisal that they have paid for. The plaintiff, a Lawton, Oklahoma resident and Captain in the United States Army Reserve who applied for mortgages on two different homes, claims to have received a starkly smaller appraisal refund for both properties than the one he was due pursuant to the defendants’ refund guarantee.

The lawsuit looks to represent all consumers who, during the applicable statute of limitations period, paid an “appraiser fee” to Ally Bank and/or Better Mortgage in the process of applying for a mortgage loan from Ally. 

Initially filed in the Third Judicial District Court for Salt Lake County on April 22, the lawsuit was removed to Utah District Court on May 24. 

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