First Alliance Settlement OKd

First Alliance Corp. and its founder reached a settlement Friday of predatory-lending lawsuits by the Federal Trade Commission, six states and several private plaintiff groups--a deal that could bring possibly $75 million in restitution to thousands of borrowers.

The Irvine home-equity lender was accused of systematically cheating homeowners on refinancing deals and concealing huge origination fees. The interest on many loans inevitably would be much higher than the initial rate, the suits said.

The deal, signed by attorneys for all parties, would provide funds to cover claims as far back as 1992.

“We have a tentative agreement, and I think it will work out,” said Herschel Elkins, head of the consumer law unit at the California attorney general’s office. He declined to comment further.

Others involved in the case said First Alliance would liquidate its assets to provide most of the money to a redress fund for borrowers. The assets of the company, which filed for bankruptcy in 2000, is believed to be worth more than $70 million, most of which would be available for the fund after other debts are paid.

As part of the settlement, First Alliance’s founder, Brian Chisick, and his wife, who still own 80% of the company, have agreed to provide millions of dollars of their own, people involved in the negotiations said. Without admitting guilt, the Chisicks also agreed to be banned from the lending business for life. The agreement must be approved by the FTC, the state attorneys general and District Judge David O. Carter in Santa Ana.

In an offshoot case, several attorneys representing borrowers have sued the financial firms that lent money to First Alliance and bundled its loans into securities for sale to investors. The defendants, Lehman Bros. Holdings, Prudential Securities and First Union Bank, deny wrongdoing.