Class Action Targets Allegedly Misleading Property Tax Estimates on TRID Disclosures and other Documents: What Should Mortgage Companies Take Away
A new class action lawsuit filed on October 1, 2025, in U.S. District Court in Florida alleges that a large homebuilder and its affiliated mortgage company used deceptive practices to make their financing of newly built homes appear more affordable than it was by using tax estimates based on the unimproved value of the property. The complaint alleges that the defendants engaged in a “bait-and-switch” and “monthly payment suppression” scheme that gave consumers understated property tax estimates in the TRID disclosures and other documents, resulting in the consumers being quoted lower monthly payments than they would ultimately owe after property taxes were reassessed based on the improved property value. I briefly discuss the allegations and provide some thoughts below.
The Alleged “Payment Suppression”
According to the complaint, the builder and its mortgage affiliate, which finances most of the builder’s transactions, worked together to provide “suppressed” total monthly payment quotes to consumers at the shopping and application stages of the transaction. The plaintiffs allege that the lender and builder used pre-construction property tax assessments based only on the unimproved land value, rather than the improved value that would apply once the home was completed. They allege that this “suppressed” amount was in all of the companies’ paperwork through closing and that this amount was also used when setting up the escrow account.
With respect to the TRID disclosures, the complaint alleges that “suppressed” tax figures were disclosed on the Loan Estimate (LE) and Closing Disclosure (CD). The complaint even included images of the pertinent sections of these disclosures, including the Projected Payments table and the Escrow table on the CD. The complaint discusses in depth certain language on the TRID forms, including the statement that the escrow payment and taxes “can increase over time,” the lender’s disclosure that only “SOME” property taxes are included in the escrow payment, and the CD’s statements about non-escrowed property costs.
Discussing the impact on the plaintiffs, the complaint alleges that in some cases, homeowners reportedly saw total payment increases of nearly $1,000 per month, as new servicers collected funds to cover escrow shortages and create new reserve cushions. The complaint alleges that these unexpected increases caused financial distress and potential default for many first-time and moderate-income homebuyers.
Legal Theories and Regulatory Framework
The plaintiffs assert violations of federal and state law, including claims under the Racketeer Influenced and Corrupt Organizations Act (RICO); Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) based on violations of the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), and certain FHA regulations regarding property tax estimates; and common law theories of negligence and unjust enrichment.
The RICO allegations are particularly noteworthy. The plaintiffs claim the builder and its mortgage affiliate formed an “enterprise” that used interstate electronic communications—including loan application platforms and e-signature systems—to transmit false or misleading payment information. The use of this theory may reflect a growing willingness by plaintiffs to invoke RICO in consumer lending cases involving coordinated conduct.
Compliance Implications for All Mortgage Lending
First of all, we do not have the full picture here, because all complaints are one-sided, for obvious reasons, and there have been no filings by the defendants as of yet. It remains to be seen whether the allegations will withstand legal challenge. But the filing serves as an early warning for homebuilders and all mortgage lenders. This case may generate increased interest in these property tax and escrow account issues under federal and state law from both regulatory agencies, attorneys general, and the broader public.
In addition, these concerns go beyond the specific builder-affiliated-lender scenario in the complaint. Similar disclosure issues with respect to property taxes and escrow accounts can arise in other contexts, such as lending relationships with unaffiliated builders and construction-to-permanent lending. Further, the case raises interesting issues regarding the TRID rule’s property tax and escrow account disclosure requirements, as well as the language on the forms, which all lenders should consider. The good faith requirements under TRID, including for costs not subject to the “tolerances” such as property taxes, and the escrow account requirements under RESPA can result in significant liability. While the complaint’s discussion of the language on the TRID forms does raise questions regarding the plaintiffs’ understanding about how the TRID forms and rule work, the potential liability for TRID violations, which could potentially include statutory damages under TILA and state law UDAP statutes, should be taken seriously. All mortgage lenders should pay close attention to how their tax and escrow estimates are generated and disclosed to consumers and ensure that any marketing materials are not misleading.
Please email me at rich@garrishorn.com if you would like to discuss any of the issues in this post.
