Fannie Mae, BNY Accused of Inflating Rates on Loan Foreclosures

Home lenders and their partners have been cheating New Yorkers by inflating what they owed on home equity loans that fell into foreclosure, according to lawsuits filed Thursday.

The systematic miscalculations diverted thousands of dollars from people who fell behind on loans, homeowners said in documents filed in federal court in Brooklyn, New York. The discrepancies allegedly stem from improperly charging compound interest instead of simple interest for the time span from when lenders ask the court to authorize a sale and when the motion is granted.

Defendants named in the cases, which seek class-action status, include units of Fannie ...