New York Attorney General Is Taking a Look at Foreclosure Threats.(Eliot Spitzer filed a lawsuit on behalf of Richard Hall against First Horizon Home Loan Corp.)

First Horizon Home Loan Corp., a subsidiary of the nationally chartered bank, First Tennessee National Corp., has offered to absorb loan payments and reimburse a Rensselaer County, N.Y., homeowner who alleges the bank illegally threatened to foreclose on his home. The move comes after attorney general Eliot Spitzer filed a lawsuit on behalf of the consumer, Richard Hall, of East Greenbush, N.Y.

"It's great, but I think it's unfortunate that it had to get to this point," said Donna Heinrichs, the consumer's attorney.

Mr. Spitzer filed the lawsuit in New York State Supreme Court here as a direct challenge to the Office of the Comptroller of the Currency, which maintains that it has the sole right to regulate nationally chartered banks. "The bank's actions in this case are preposterous," Mr. Spitzer said in a press release. "The consumer paid off his mortgage, but the bank continued to bill him for years, and now threatens to foreclose.

"The case also underscores the misguided policies of OCC, which has directed national banks to ignore state regulators attempting to enforce long-standing consumer protection laws."

The lawsuit argues that in 1974, Richard Hall took out a 25-year, $27,000 mortgage from Mechanics Exchange Savings Bank. The terms of the loan included an 8.5% interest rate and a monthly payment of $201.31. The loan was assigned several times, and since 1995 has been held by First Horizon Home Loan Corp.

Since 1995, the consumer made payments to First Horizon by automatic debit from his checking account. Despite the fact that the final payment was made in October 1999, First Horizon continued to debit $201.31 each month from his account.

In May 2003, First Horizon notified the consumer that because of an alleged error by Mechanics Savings in 1974, he should have been paying $16 more per month.