Disputed Foreclosure Litigated

Leon L. Morris and Allison S. Morris filed a complaint against the Merrill Lynch Bank & Trust Co. subsidiary on March 16, 2007.

First Franklin conducts mortgage-related advertising, underwriting and business practices in violation of the Fair Housing Act, among other federal and state laws, the complaint said.

The lawsuit was amended Wednesday in the U.S. District Court for the Northern District of Georgia to add allegations of unfair and deceptive acts and practices, according to a press release issued that afternoon by Allison. They allegedly were denied a mortgage on “fabrications and misrepresentations of their credit information.”

In a March 23 answer filing to the original complaint, First Franklin, which was not immediately available for comment, denied all the allegations, including that its policies, practices, procedures, and guidelines are discriminatory.

The couple applied for a stated-income loan and had a credit score above 680, Allison Morris told MortgageDaily.com in an e-mail statement.

Leon Morris applied individually for a loan and then jointly with Allison Morris over the course of several weeks in January and February, according to the March 16 suit. The San Jose, Calif.-based lender repeatedly declined to refinance a primary residential mortgage based on its “intentional misrepresentation” that the couple had an unseasoned foreclosure in their record.

The complaint alleges the applicants made First Franklin aware in writing via a property title examination report, credit report, property appraisal and other documents that they have held title to the subject property in Woodstock, Ga., since May 1994 and have never had a property foreclosed on.

“First Franklin stubbornly refused to recognize these facts in underwriting and intentionally, willfully, recklessly, and with little to no regard for either the facts, the law or [the couple’s] rights chose instead to classify and misrepresent a late mortgage payment as an unseasoned foreclosure,” the complaint read.

Additionally, the lender is readily aware that the Morrises are African Americans and that its policies, practices, procedures and guidelines are not only discriminatory but are illegal and deprive the couple of the financial services it otherwise provides, the couple maintain.

But the subprime lender denied the charges.

First Franklin said the Morrises were turned down for a mortgage because of legitimate, nondiscriminatory reasons and its decision was based on written policy, which was disclosed to the couple.

“First Franklin admits that among the reasons it declined to provide financing to [the Morrises] was due to an unseasoned foreclosure on [their] credit report,” the answer to the complaint read. “First Franklin denies that [the couple’s] property was never foreclosed on according to First Franklin’s underwriting guidelines.”

The unit seeks for the lawsuit to be dismissed and to be awarded its cost of the suit.

Allison said in the announcement that the company closed more than 650 mortgages a day in 2005.

“The company may be looking to tighten its credit standards, but it should make sure its standards are lawful and don’t result in reckless, and intentionally dishonest and fraudulent conduct,” Allison’s announcement indicated.