"This agreement will put cash back in the pockets of home-owning Pennyslvania families who have been forced to carry excessive balances in their mortgage escrow accounts," Preate said.
The refunds are part of an agreement filed yesterday to settle a federal lawsuit brought in 1990 by 12 states, including Pennsylvania, alleging that GMAC overcharged on escrow for property taxes, home insurance and other items.
The Elkins Park-based unit of General Motors Acceptance Corp. denied any wrongdoing and termed the $100 million refund estimate "grossly exaggerated."
Most mortgage lenders require borrowers to pay into escrow accounts to ensure that money's available for other homeowner expenses - such as real estate taxes and insurance. The lender then pays those bills from the escrow account as they come due.
GMAC spokesman Richard Gillespie said the company's escrow calculations were "accepted as the industry standard and (were) well within federal and state requirements." He said GMAC settled the lawsuit to avoid costly litigation.
GMAC said it reaped no financial gain because it doesn't earn interest on the escrow, and can't lend or invest the money.
Although the settlement applies only to GMAC, New York Attorney General Robert Abrams said that overcharging was widespread and that mortgage lenders could be holding $2 billion to $4 billion more escrow than is legally owed.
The states are pushing proposed federal legislation that would clarify escrow limits and require mortgage companies to pay 5 1/2 percent interest on account balances. The proposal, which also would allow consumers to stop paying escrow after they retire 20 percent of the loan principal, faces stiff industry opposition.
Preate plans to meet with Pennsylvania mortgage companies to convince them to voluntarily abide by the GMAC settlement.
