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Mortgage Firm to Repay Customers in $60M Settlement of Federal Charges

A California mortgage company accused of deceiving poor and elderly homeowners into taking out loans with large hidden fees has agreed to a $60 million deal to settle federal and state charges. The Federal Trade Commission announced Thursday that Irvine, Calif.'s First Alliance Mortgage Corp. will repay nearly 18,000 of its customers in 18 states and the District of Columbia.

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A California mortgage company accused of deceiving poor and elderly homeowners into taking out loans with large hidden fees has agreed to a $60 million deal to settle federal and state charges. The Federal Trade Commission announced Thursday that First Alliance Mortgage Corp. agreed to repay nearly 18,000 of its customers in 18 states and the District of Columbia. Under the proposed settlement the fund would include all the assets of the Irvine-based company, which filed for bankruptcy in 2000, plus a $20 million payment from First Alliance chief executive Brian Chisick and his wife, Sarah, who served on the board of directors. Jerry Hager, a First Alliance vice president, and Ronald Rus, a lawyer for Brian Chisick, both said they were pleased to have resolved the case. Hager added that “there was never any finding of wrongdoing on the part of First Alliance or any of its employees.” Under the settlement, First Alliance and its officers do not admit breaking any law. If approved by a federal court, the deal would end cases brought by the FTC, customers, the AARP, and the states of Arizona, California, Florida, Illinois, Massachusetts and New York. The estimated settlement is one of the biggest in the FTC’s history, second only to a $61 million agreement with General Motors Corp. in the 1980s, FTC Chairman Timothy Muris said at a news conference with attorneys general from some of the states. Borrowers who obtained First Alliance loans from 1992 through March 23, 2000, and who have not previously settled with the company, would be eligible for refunds under the agreement. The average consumer would get about $3,000, Muris said. In October 2000, the FTC accused First Alliance of deceiving consumers into believing they were borrowing money with no fees. The company allegedly didn’t tell customers about fees that amounted to up to one quarter of the total loan and misled borrowers about interest rate increases and monthly payments, the agency said. Copyright 2002 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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