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A lawsuit filed Monday in Hennepin County District Court by Attorney General Lori Swanson alleges that Meredian Financial Corp. of Costa, Mesa., Calif., pretended to be homeowners' current mortgage company in order to gain their trust, then collected fees for refinancing services that were not delivered.
"Meredian targeted homeowners struggling in the troubled economy who were looking to get out of an adjustable-rate mortgage or lower their interest rate by refinancing," Swanson said in a statement announcing the suit. The company's tactics, she said, "left homeowners with the short end of the stick."
Numerous online consumer blogs indicate that Meredian has been carrying out this alleged scheme for the past few years. Also, regulators in Georgia last year ordered Meredian to stop doing business in their state.
A telephone message was left with Meredian seeking reaction to the suit.
Here's how the attorney general's office says the scheme worked:
Meredian presented itself as a homeowner's current mortgage lender, sometimes mentioning the consumer's lender by name, other times not. Meredian then made numerous false representations including low fixed rates, no out-of-pocket expenses, no appraisal requirement, and that the refinance had already been approved by an underwriter, in order to get them to pay upfront "rate-lock" fees.
Meredian said that these fees -- typically from $1,000 to $4,000 -- would be refunded at closing, which it contended would occur within 30 to 45 days.
Once Meredian obtained the fees, it would cease work on the loan, creating excuses such as asking for documents that the homeowner already had provided or that were irrelevant to the refinancing, or changing the terms of the refinancing with higher rates and fees.
Homeowners who attempted to cancel and requested that Meredian return their upfront fees were denied refunds.