First published Nov. 26, 2003:
Hundreds of Whatcom County homeowners who got home mortgage loans from the Bellingham office of a branch of Household International Inc. could get sharply reduced interest rates and partial refunds of loan fees under a proposed legal settlement announced Tuesday.
If approved by Whatcom County Superior Court Judge Steven Mura, borrowers who got first mortgages at Household Finance Corp.'s Bellingham office between January 1999 and May 31, 2002, could be eligible for:
Reduction of first mortgage rates to 7.5 percent, a substantial break for homeowners who have been paying more than 12 percent in many cases, according to court documents.
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Refund of loan fees, or "points," above 4 percent of the loan principal, which could mean refunds in the thousands for borrowers who paid points as high as 7.25 percent in many cases.
In legal documents filed Tuesday, the plaintiffs say the Bellingham HFC office made an average of 10 mortgage loans a month during the period in question, which would mean more than 400 borrowers could be eligible for the deal. No date has been set for Mura's review of the deal.
The improved loan terms and refunds would be in addition to any cash settlement the homeowners receive under the nationwide, $484 million consumer fraud settlement between Household and attorneys general in all 50 states and the District of Columbia that was approved last December.
Until now, Household borrowers have been told that if they wanted their share of the nationwide settlement money, they would have to sign away their rights to collect any other damages from Household.
In lawsuits filed here and in U.S. District Court in Seattle, borrowers alleged they were tricked into refinancing their home mortgages at higher rates, and were not given proper notice of the hefty loan points that were part of the deal.
The first plaintiffs in the case were Joe and Jeanie Luna of Blaine. Other county homeowners later joined in the suit, filed by attorney Robert Parlette of Wenatchee.
In a news release, Household executive Thomas Detelich said the company was prepared to make a special settlement with the company's Bellingham customers because "the conduct in our Bellingham branch was markedly different than the sales practices in our remaining Household and Beneficial branches located throughout the state of Washington."
Although state regulators acknowledged getting a disproportionate number of consumer complaints about HFC loans originating in Bellingham, an investigation by the Washington Department of Financial Institutions found abuses at other offices in the state.
Similar problems nationwide led to the $484 million settlement, the largest for a consumer protection case in U.S. history.
As a part of the settlement deal, company representatives and plaintiffs and their attorneys said they agreed to make no public comment beyond the news release issued Tuesday by Household.
Assistant State Attorney General David Huey, who was involved in last year's nationwide settlement of abusive lending claims against Household, said the settlement of private lawsuits looked like a good deal for consumers.
Huey said plaintiffs' hopes for an even better deal were dashed last June when U.S. District Court Judge Robert Lasnik rejected their quest to make the matter a statewide class-action lawsuit.
Meanwhile, settlement checks from the state's share of the $484 million nationwide deal could be in Household borrowers' hands by Christmas, Huey said.
About 11,000 Household borrowers in Washington will split the state's $21 million share. Huey said some borrowers who were most damaged will get checks in the $20,000 range, but the median amount is about $1,500.
HFC and Beneficial Corp. are both subsidiaries of Household International, based in Prospect Heights, Ill. Household was an independent nationwide lending firm at the time the lending abuses are alleged to have occurred. HSBC Holdings plc bought Household International for $14.2 billion last November.