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| Long before the Ameriquest and Countrywide settlements, there was the settlement with First Alliance Mortgage Co. — which was touted as the biggest ever at the time by the government. With a huge recent payment to 15,000 of its borrowers, the defunct subprime lender has completed its obligations under the settlement.
In March 2002, First Alliance and its chief executive officer, Brian Chisick, agreed to a settlement with the Federal Trade Commission over allegedly operating a sophisticated sales scheme where borrowers were misled about loan terms and charged between 10 and 25 percent in fees. Also included in the settlement were the states of Arizona, California, Florida, Illinois, New York and Massachusetts as well as the AARP. At the time, the FTC said the settlement was one of the largest consumer protection recoveries in its history and could yield as much as $60 million for 18,000 borrowers. Chisick and his wife personally agreed to pay $20 million. An FTC news release today indicated that $8 million in redress checks were recently mailed to more than 15,000 First Alliance borrowers. In all, the agency said refunds totaled $74 million to nearly 23,000 First Alliance borrowers. “The company misled consumers about the existence and amount of origination fees for its loans, and the interest rate and monthly payments of their adjustable-rate mortgage loans,” the FTC said. The Irvine, Calif.-based firm has since liquidated through bankruptcy. The record for settlements was shattered later in 2002 when Citigroup Inc. settled with the FTC for $215 million allegations of deceptive and abusive lending practices by Associates First Capital — which Citigroup acquired in 2000. Citigroup’s settlement was overshadowed by a $484 million predatory lending settlement with several state attorneys general by Household International Inc. In 2006, Ameriquest Mortgage Co. agreed to a $325 million settlement with 49 states to resolve charges of alleged predatory lending. But the mother of all settlements was Countrywide Financial Corp.’s $8 billion settlement with several states over allegations of gross predatory lending and shoddy underwriting. Most of those settlement costs, however, will be borne by investors of Countrywide mortgage-backed securities. Federal Trade Commission, Plaintiff, v. First Alliance Mortgage Company, a California corporation, First Alliance Corporation, a Delaware corporation, First Alliance Mortgage Company, a Minnesota corporation, and Brian Chisick, Defendants, and Sarah Chisick, Relief Defendant. |
