EL CAJON, Calif. (CN) - In a textbook case of lenders' mortgage fraud, First Franklin Financial arranged for an auto body painter and a hotel maid with a combined monthly income of $3,400 to buy a $460,000 house with 100% financing and $3,410 monthly payments - before taxes and insurance - then repossessed it a year later, even though the couple had somehow managed to keep current on their payments, the couple claims in Superior Court.
Plaintiffs' attorney says First Franklin and others took advantage of unsophisticated, first-time homebuyers Francisco and Azalia Mendoza. Their basic "qualification" for the loan was to "just be alive," according to the complaint.
The defendants sold the plaintiffs the house with two mortgages: a $368,000 interest-only adjustable rate loan starting at 7.05%, changing every 6 months to a maximum of 13.05%, and a second, fixed-rate, interest-only loan for $92,000 at 12.05%.
"Plaintiffs' combined payments to FFFC were $3,410 exclusive of property taxes and insurance," the complaint states. The Mendozas managed to make their payments by renting out a room and "sacrificing everything, including basic necessities of life."
But in May 2008, "Plaintiffs were shocked by a letter from FFLC that the loans were in default and no further payments would be accepted. Further payments were rejected on the basis that Plaintiffs had never provided proof of insurance as required by the Deeds of Trust. Defendants rejected Francisco's protestation, objections, and proof of insurance naming FFFC as Mortgagee from the inception of the loans and wrongfully proceeded with foreclosure.
"FFFC through its broker and loan originator 'business partners' deceptively marketed the loans as affordable but Defendants knew, or should have known, that they recklessly put Plaintiffs in peril of any unforeseen contingency. In this case, the unforeseen contingency was FFC's own wrongful conduct regarding proof of insurance."
Plaintiffs seek injunctive protection and damaged for fraud, negligence, emotional distress, and other charges. They are represented by David St. John of Oxnard.
Here are the defendants: La Salle Bank National Association as trustee for Merrill Lynch Mortgage Investors Trust 2007-3, Mortgage Loan Asset-Backed Certificates, Series 2007-3; First Franklin Financial Corp.; Merrill Lynch Bank & Trust Co.; First Franklin Loan Services; and Mortgage Electronic Registration Systems Inc., a suspended California corporation.
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