First Alliance Borrowers Press for $305 Million

Borrowers of First Alliance Corp., with the support of the American Assn. of Retired Persons, say they are owed $305 million from the mortgage lender, which filed for Chapter 11 bankruptcy protection last month.

The claims, made in court papers filed this week, suggest that the borrowers and AARP may decide to press their legal cases against First Alliance in U.S. Bankruptcy Court in Santa Ana.

Before its collapse, First Alliance had been sued by numerous borrowers who accused it of overcharging fees and preying upon seniors. The company also is the target of several state and federal regulatory probes.

With the bankruptcy filing, most of those claims are expected to be moved to bankruptcy court.

Sheila Canavan, a lawyer for some First Alliance borrowers, said the $305-million claim represents the loan fees and interest collected by First Alliance from more than 20,000 borrowers over the past four years.

William Lobel, First Alliance’s bankruptcy attorney, said he will object the borrowers’ claim.

The borrowers also are seeking representation on the company’s official committee of creditors.