A class action, which apparently covers all U.S. residents, has been filed in Pennsylvania against mortgage giant American Home Mortgage Corporation. The action is brought on behalf of all consumers who, since 2001, were not furnished with mandatory credit information, or provided with contact information for obtaining this information, after American Home either denied them a mortgage loan or provided one with elevated interest rates or fees. The consumers allege that American Home relies on various credit reports, third party reports and other sources when making a decision to lend a consumer money to purchase a home. The consumers claim that the federal Fair Credit Reporting Act requires American Home to inform individuals who have had an "adverse" decision (generally a denial to lend funds or an acceptance with higher rates and additional fees) as to what sources formed a basis for this decision and provide contact information so that the consumer can obtain a copy of this information. Additionally, consumers allege that American Home does not allow consumers to dispute the validity of the information relied upon, which further violates the Fair Credit Reporting Act. Finally, consumers claim that American Home intentionally withholds this information from consumers as part of a systematic scheme to keep them uninformed. The consumers are seeking compensatory, statutory and punitive damages. The consumers also seek a court order requiring American Home to provide all applicants who experience adverse decisions with all information required under the Fair Credit Reporting Act.

It is common practice for lenders to rely upon certain information when deciding to make a home loan. Typically, this information consists of credit reports provided by one of the large credit repositories coupled with credit scores. This information often includes what is known as consumer reports, which are reports generated by submitting the basic information into various underwriting programs. Frequently, mortgage originators sell the mortgages to third parties shortly after they have been issued. American Home commonly sells mortgages to the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The consumers allege that, as a basis for Fannie Mae's and Freddie Mac's ongoing commitment to purchase mortgages originated by American Home, American Home agrees to run all prospective applications through either "Loan Prospector" or "Desktop Underwriter," the automated underwriting systems used by Freddie Mac and Fannie Mae.

The consumers claim that the reports generated by these systems are relied upon when determining whether to offer a loan, because American Home is reluctant to offer a mortgage it cannot sell to a third party. Allegedly, Fannie Mae and Freddie Mac review these reports and, prior to a loan even being issued, give American Home advance notice of whether they would be willing to purchase the loan. This notice is generally part of a single consolidated report that contains all of the various forms of information collected about the applicant, in one package, along with a "risk analysis" and recommendation on whether American Home should approve the application. It is these reports and the information contained within them that form the basis of this class action.

Under the federal Fair Credit Reporting Act, a lender is required to furnish an applicant who has been denied or had other "adverse" action taken against him or her with certain information. This information includes: (a) notice of the adverse action; (b) the name, address and phone number of the consumer reporting agency (or a company such as Freddie Mac or Fannie Mae that provided a consumer report); (c) a statement that the reporting agency did not make the adverse decision and is unable to provide the consumer with information as to why the adverse decision was made; (d) notice of the applicant's right to obtain a free copy of the report that was furnished; and (e) notice of the applicant's right to dispute the accuracy or completeness of the information in the reports. The class members allege that American Home failed, to and continues to fail, to provide this information to class members upon an adverse decision. The consumers further assert that this conduct was willful and intentional and that American Home maintains a policy prohibiting employees from disclosing this information to applicants.