AARP Joins Suit Against First Alliance Mortgage
The American Assn. of Retired Persons on Wednesday threw its weight behind a lawsuit charging a large Irvine-based mortgage firm with fraud and elder abuse for allegedly engaging in predatory lending practices.
AARP lawyers said it was the first time the giant senior citizens organization had taken part in such a lawsuit, adding that the group is increasingly concerned about deceptive lending practices aimed at elderly borrowers.
The target of the suit, First Alliance Mortgage Co. of Irvine, said in a prepared statement it was “shocked” by the announcement and denied any wrongdoing.
But the company has faced similar allegations before. Without admitting guilt, the firm in 1994 agreed to pay $6.85 million to settle a class-action suit accusing it of charging inflated and undisclosed loan fees.
The AARP’s involvement adds momentum to a recent string of lawsuits filed by individual borrowers, mostly in the San Jose area, who claim that First Alliance inflated and failed to disclose loan fees.
Despite the class-action settlement, “we believe that [First Alliance’s] approach is more aggressive now than it was then,” said David J. Hofmann, a lawyer for the borrowers.
The seniors group--which boasts more than 30 million members, including 2.9 million in California--on Wednesday filed an amended complaint in Santa Clara County Superior Court in which it joined in the lawsuit of one of the borrowers, Mary Ryan. Ryan, 76, who is from the San Jose area, had borrowed from First Alliance in 1995 and 1996.
According to Hofmann and AARP lawyers, First Alliance uses aggressive direct mail and telemarketing campaigns to tout its “low rates.” In fact, they claimed, borrowers end up paying “unconscionable loan origination fees and other junk fees” that average about 15% of the loan.
According to the lawsuit, the firm targets seniors--who have fixed incomes but own their homes--”for the purpose of appropriating the equity in the elder’s home.”
Said Nina Simon, a lawyer with the litigation program of the AARP Foundation: “This problem of targeting older homeowners for high-cost loans and stripping the equity from them is just mushrooming, and we are trying to stop it.”
First Alliance, which originated nearly $529 million in loans in 1997, is known as a “sub-prime” lender--often dealing with customers who have trouble getting loans from conventional sources, usually because of low or irregular incomes or spotty credit ratings.
Chairman Brian Chisick said First Alliance stands “by our record of 25 years of service to homeowners who need access to mortgage lending. Our borrowers, in many cases, cannot obtain funds through traditional lenders and depend on us.”
In addition to the claims of fraud and elder abuse, the suit seeks judgment under provisions of the state Business and Professions Code that allow a litigant to act as a “private attorney general” in seeking to halt deceptive business practices.
