Quality Home Loans claim top $330M

The investors claim they were never told about the change in strategy at Quality Home Loans. They also claim that Gaiser needed their approval for the shift because it incurred risks to their investments they had not been warned about. “I had no knowledge that they were deviating from 65 percent [loan-to-value loans],” Marc Forman, a Ventura County man who is named as a plaintiff, said in an interview with the Business Times. Gaiser did not return telephone messages seeking comment.

Investors also allege Klein and Pacificor needed, but failed to get, their approval to offer Quality Home Loans infusions of cash between May and August in exchange for mortgaged-backed securities from the lender. “Although named in the complaint filed by a putative class of QHL investors, Pacificor and Michael Klein are not the real focus of the plaintiffs’ allegations,” said Kurt Benjamin, vice president of business development at Pacificor.

“We believe that the allegations specific to Pacificor and Michael Klein are totally without merit. We expect the allegations against Pacificor and Michael Klein to be dismissed well before trial.” For its part, Pacificor has claimed it is owed $42 million because of a cash-for-bonds arrangement in which Quality Home Loans failed to hold up its end of the bargain.

In a declaration to the bankruptcy last fall, Klein wrote that between May and August Pacificor paid Quality Home Loans about $46 million in cash for about $59 million worth of mortgage-backed securities. According to the agreement, Klein said, Quality Home Loans was supposed to buy back the bonds at a later date. The deal included several safeguards for Pacificor. The hedge fund could demand Quality Home Loans buy back the securities at any time, Klein wrote in his declaration.