NovaStar Home Mortgage Inc. and two other lenders accused of engaging in bait-and-switch tactics on the online mortgage-lead-generation site Bankrate.com have been hit with a $46 million judgment.
The judgment in favor of another Bankrate.com client, American Interbanc, triples a $15.9 million jury verdict in favor of American Interbanc, on May 4.
In a June 27 judgment, Orange County Superior Court Judge Michael Brenner agreed with American Interbanc’s claims that attempts by other lenders to prevent the company from using Bankrate.com amounted to an unlawful restraint of trade, subject to triple damages.
NovaStar Home Mortgage Inc.’s parent company, NovaStar Financial Inc., said it will appeal the judgment.
“We believe the jury decision was not supported by the facts. NovaStar Home Mortgage Inc. will pursue all available means to ask the court to reverse or overturn the verdict,” NovaStar said in a statement.
American Interbanc’s lawsuit against several lenders who used Bankrate.com to drum up business was filed in March 2002. The lawsuit alleged that the lenders’ failure to grant loans at the promised rates amounted to false advertising.
The lenders allegedly pressured Bankrate.com into barring American Interbanc from using the lead-generation site. American Interbanc added Bankrate Inc. as a defendant in November 2002, after it refused to renew the lender’s contract to advertise on the site.
Without admitting fault or liability, Bankrate in October agreed to pay American Interbanc $3 million to settle allegations that the company did little to prevent lenders from engaging in bait-and-switch tactics. Under the agreement, American Interbanc’s access to the Bankrate.com site was also restored.
According to the judgment, American Interbanc has received $1.6 million from Bankrate, and reached settlements with Mitch Lichterman and Loanguy.com Inc. ($25,001), Roderick Nielson doing business as The Loan Emporium ($20,000), Wesley Mayder doing business as Western Capital Mortgage ($25,000), Mountain States Mortgage Center Inc. ($10,000) and Silver Rhino LLC ($25,000).
The other lenders subject to the $46 million judgment are Amerimax Realty Financial Inc. of Newport Beach, Calif., and Business Mortgage Inc. (BMI) of Clearwater, Fla.
Amerimax Realty was not represented by an attorney in the trial. The company official named in the judgment, Gary E. Rausch, declined to comment.
Records show the California Department of Real Estate revoked Rausch’s real estate broker’s license in August 1998 for operating Amerimax and acting in the capacity of a real estate broker before he had obtained his broker’s license in 1997.
In 2001, the Department of Real Estate suspended Amerimax’s license, along with the real estate broker’s license of its designated officer, Sandra K. Rausch, for 60 days, after finding the company failed to disclose to borrowers compensation it received from lenders and charged excessive fees for credit reports.
Inman News was unable to contact BMI, and an attorney representing the company in the lawsuit did not immediately return a phone call.
Records show the California Department of Corporations revoked BMI’s mortgage lending license in September 2003, after the company failed to file an audited financial statement for 2002. The company also allowed its mortgage broker’s registration in New York to lapse in 2003.
“NovaStar is obviously the one public company, and would be the most likely candidate for being able to pay the judgment, but we are a long way from there,” said William D. Claster, the Irvine, Calif.-based attorney representing American Interbanc. A hearing on a motion by the defendants for a new trial is set for Aug. 20.
Last month, NovaStar Mortgage agreed to settle a class-action lawsuit in Washington state for $5.1 million. The lawsuit alleged NovaStar didn’t properly disclose yield-spread premiums borrowers paid to mortgage brokers who placed them in loans with higher interest rates than they were qualified for.
The settlement provides $3.2 million for about 1,588 borrowers, with awards ranging from $67 to $19,618. The average award will be about $2,011. NovaStar is paying the two Seattle law firms that represented borrowers $1.8 million.
