"A national lender accused of deceptive sales practices and charging outrageous fees while funded by one of the most prestigious banks on Wall Street was the focus of a joint ABC News 20/20-New York Times investigation of the First Alliance Mortgage Company.
"The ABC News 20/20--New York Times team discovered that authorities in a number of states were investigating First Alliance, accusing it of using a slick but misleading sales spiel to lure thousands of elderly homeowners into loans that sucked away the equity they had built up in their homes. Regulators had charged that First Alliance salespeople routinely misled borrowers about the inexorably escalating interest rates and the huge origination fees (some more than 20 percent of the loan) that were built into their mortgages.
"But what pushed the investigation beyond other earlier examinations of local abusive lending scandals was tracking the money behind First Alliance - all the way to Wall Street. More surprising than the regulatory accusations facing First Alliance was the source of its funds: Lehman Brothers, the prestigious investment bank that had actually raised the cash -- to the tune of hundreds of millions of dollars - that kept First Alliance in business. Despite First Alliance's regulatory track record, its high-interest mortgages were bundled together by Lehman Brothers and sold to big Wall Street investors, who then received interest payments from the homeowners.
"In the aftermath of our investigation, First Alliance ceased making new loans and filed for bankruptcy, claiming that it was forced to do so in part due to the 'unwarranted negative publicity' generated by our report. The joint investigation was also widely cited by fair-housing activists, who said it helped revive Washington's interest in regulatory and legislative reforms and encouraged the Department of Housing and Urban Development to hold nationwide hearings to examine abusive lending practices."--2000 Peabody Awards entry form.
Corporate Producers: New York Times Company | ABC News
Broadcast Date: 2000-03-15
