A settlement in a class-action lawsuit will cost Fairway Independent Mortgage Corp. more than a million dollars. At issue are alleged undisclosed yield spread premiums and claims of mortgage fraud by a Missouri originator.
In January 2006, Nicole L. and Alexander C. Glen purchased a property in O’Fallon, Mo.
The purchase was financed with a $432,671 first mortgage and a $115,379 second mortgage — both brokered by Fairway.
But the couple claim that their loan application was “altered” by Fairway to show “substantially” higher income than the borrowers actually earned.
They also allege that Fairway tried to deceive them about the amount of the monthly payments by omitting the property taxes from the estimated monthly payment. In addition, according to the couple, Fairway “mortgage specialist” Anthony M. Hewston promised that Fairway would refinance the loan at a much lower rate once they sold their prior residence.
Hewston is accused of providing a typed loan application to the wholesale lender on the loan, Ohio Savings Bank, that contained false information and forged signatures.
The Glens claim that their payments were more than they could afford, and Fairway failed to refinance the loans as promised, causing them to suffer “substantial economic damage.”
They claim that Fairway had a fiduciary duty to provide them with the least expensive loan and breached that duty by collecting $9,747 in yield spread premiums. In addition, Fairway allegedly failed to disclose the YSP in a May 2005 Good Faith Estimate and another disclosure in December 2005.
So the Glens sued Fairway in St. Charles County Circuit Court in 2007. Fairway, which denied the allegations, successfully filed a motion to move the case to U.S District Court for the Eastern District of Missouri.
Attorneys for the plaintiffs sought class certification in the case.
On Wednesday, U.S. District Judge Rodney W. Sippel approved an approximately $1,035,355 settlement between the plaintiffs and Fairway, according to a copy of the final judgment.
Attorneys for the plaintiffs, Butsch Simeri Fields LLC, will receive a third of the settlement proceeds, or $341,667, and $25,000 in litigation expenses.
“Fairway is confident it was in compliance with all state and federal laws in connection with mortgage banking and mortgage brokering during the period in question,” Fairway General Counsel Elizabeth Steinhaus said in a written statement. “Due to confidentiality provisions in the settlement agreement, we are not able to comment any further.”
NICOLE L. GLEN, et al., v. FAIRWAY INDEP. MORTGAGE Corp., Plaintiffs.
Case No. 4:08-cv-00730-RWS (U.S. DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION).
