The parties have reached a tentative partial settlement in a national class action against lenders First Union National Bank of Delaware, First Union Home Equity Bank, and First Union Home Equity Corporation (collectively known as "First Union") on behalf of all persons who obtained a home equity or other loan that resulted in a mortgage from the lenders that was brokered or referred to First Union by either Pennsylvania Resource Corporation or First Liberty Financial Services at any time between May 10, 1995, and the eventual date of any judgment in the action. The action alleges that the lenders did not provide consumers with complete information about the closing costs that they paid and the terms of their loans in order to obtain home equity loans or similar loans secured by a mortgage from First Union in violation of state and federal lending laws. Claim forms must be received by August 11, 2003, to be considered valid.

More specifically, the action alleges that, at the time affected homeowners signed contracts with Pennsylvania Resource Corporation to do home improvement work, the homeowners all received the very same "good faith estimates of closing costs" or GFEs. Allegedly, these preprinted forms significantly understated the homeowners' actual closing costs. The homeowners also were allegedly given a document called a "Savings Proposal" that set forth the approximate amount of their new monthly payments. These estimated monthly payments were allegedly based on closing costs that were not revealed in the GFEs that the homeowners initially received. At the time of their loan closings, the homeowners learned that their actual monthly payments would be about equal to their estimated monthly payments. Because of this alleged ruse, homeowners had no reason to suspect that their actual closing costs were significantly higher than those set forth in the GFEs which they originally received.

Under the terms of the proposed settlement, First Union will offer to re-finance home equity loans of qualifying borrowers, which closed on or after May 10, 1995, at lower interest rates, without charging any closing costs. Also, First Union will offer these loans at lower interest rates than affected homeowners agreed to pay under their original First Union loan. If affected homeowners apply and qualify for a new loan, their interest rates will be reduced by at least 2%. Applicants must meet First Union's underwriting standards in order to qualify. The term of these new loans will be equal to the number of months remaining on your First Union loan or, at your choice, another period provided that it does not exceed 20 years. The settlement further provides for a lesser guaranteed reduction in interest rate on loans refinanced under this settlement after September 8, 2003, if the prime rate of Wachovia increases in the interim. It is estimated that taking advantage of this settlement may reduce mortgage payments of affected homeowners by as much as $100 per month.

If affected homeowners file a timely claim and application for re-financing but fail to meet First Union's underwriting criteria, they will receive $200 or an equivalent credit to their loan. Similarly, if they refinanced their loan during 2003, or they already have refinanced and reduced the interest on their First Union loan by at least 1.5%, they will be entitled to $200.

While this partial settlement covers claims against First Union, the action against Pennsylvania Resource Corporation and First Liberty will proceed. In an earlier court decision in the matter, the court ruled that Pennsylvania Resource Corporation and First Liberty may owe fiduciary duties to homeowners because they go into homes armed with superior information about home equity financing and obtain personal information from homeowners regarding their debts, assets and incomes.

This proposed partial settlement will not be effective until the court grants it final approval. The court has scheduled a hearing on the matter for July 18, 2003.