HUNTINGTON – Some current and former Cabell County homeowners have filed lawsuits accusing a Barboursville-based bank and two of its managers of a fraudulent loan scheme.
The First State Bank as well as FSB President Sam Vallandingham and FSB Vice President Andrew Vallandingham are listed as defendants in the lawsuits filed by Timothy and Regina Adkins, Larry and Brittani Williams and Vickie Rule in Cabell Circuit Court. Both couples live in Huntington, and Rule currently lives in Charleston, according to the complaints, but all of the homes in question are in Cabell County.
Each complaint describes what it calls “The Vallandingham Scheme” in detail.
They claim the Vallandinghams “have used their positions of influence and control of FSB to create, organize and execute a fraudulent scheme that serves to prey on resident mortgage customers such as to mislead customers into predatory loan contracts that violate West Virginia law,” the complaints state. “A central feature of the scheme … is that customers are misled into a collection of loan documents whereby the customer unwittingly gives up legal protections afforded to customers of residential mortgage under West Virginia and federal law.”
They say the scheme targets those “unsophisticated in banking and lending matters or if the customer has limited options for acquiring a home loan due to poor credit or prior problems in their financial history.”
These customers, according to the complaint, are guided into obtaining a residential loan identified as a business loan or a commercial loan.
“By writing the loan as a commercial or business loan, FSB and the Vallandinghams are able to assert that the residential home mortgage customer does not have the protection afforded West Virginia mortgage customers,” the complaints state. “Such loans typically include interest rates higher than the market rate and a requirement for a late fee payment that is unlawful in West Virginia.”
The plaintiffs say the scheme also includes an undisclosed balloon provision whereby the entire loan becomes due in full after five years and that all of the loans are kept in-house at FSB instead of being sold to third parties, meaning the bank receives all payments and profits. Individual details of each of the plaintiffs’ loans are included in each complaint.
“After five years of payments, nearly all of which is dedicated to the payment of interest, the unsophisticated consumer still owes almost the entire balance and has little hope of refinancing the loan,” the complaints state. “Accordingly, the consumer must give up the home and has acquired essentially no equity during the five years of payments.”
The complaints single out “the most prolific and talented loan officer at FSB” from 2010 to 2012, Jackie D. Cantley. They say Cantley managed a portfolio of more than $140 million in loans, including many of these types of loans, yet he “had no training in the handling of commercial mortgages, no credentials to enable him to write such loans and little to no understanding of the laws applicable to lending.”
The plaintiffs accuse the defendants of unconscionability, breach of duty of good faith and fair dealing, unfair and deceptive practices, fraud, negligent misrepresentation, an illegal balloon note and illegal debt collection.
They want the loans to be canceled and declared void and unenforceable. They also seek compensatory damages such as the fair market value of the homes they lost because of the defendants’ actions, civil penalties for violating state code, attorney fees, court costs, punitive damages.
The plaintiffs are represented by Steven M. Wright and Robert R. Waters of the Waters Law Group PLLC in Huntington.
Cabell Circuit Court case numbers 15-C-616 (Adkins), 15-C-617 (Williams) and 15-C-618 (Rule)