Mortgage Lender Makes $60 Million Settlement
First Alliance Mortgage Co., Irvine, CA, targeted consumers in the "subprime" market, which includes homeowners with poor credit ratings, the FTC said. Consumers who responded to the company's telephone and mail solicitations by visiting First Alliance's office were given a lengthy and misleading sales presentation, according to the FTC.
The presentations contained misrepresentations about the amount of loan origination fees, increases in interest rates and the amount of monthly payments, the FTC said. Loan origination fees ranged from 10 percent to 25 percent of the loan, according to the charges.
The settlement with the FTC calls for a creation of a fund to be distributed as compensation to consumers who borrowed from First Alliance during the period between 1992 and March 23, 2000. The fund will include the assets of First Alliance's bankruptcy estate, as well as $20 million from company founder Brian Chisick and his wife, Sarah, who served on the board of directors, and money from insurers.
The Chisicks will be banned from the mortgage lending business for 10 years in Arizona, Massachusetts and New York, and permanently in California, Florida and Illinois. A federal district court in Santa Ana, CA, must give final approval to the settlement.