During the third quarter of 2020, the CFPB has settled with several different mortgage companies in relationship to their advertising practices for VA-guaranteed loans. Referred to as a “sweeping effort” by the CFPB, several lenders throughout the country have been issued consent orders and fines related to their inappropriate advertising practices which often violated several laws including UDAAP and Regulation Z. The following are several of the VA advertising-related consent orders issued by the CFPB:
9/14/2020 - ClearPath Lending, Inc. was issued a consent order in relationship to violations of several rules relating to the advertising of VA loans. From the CFPB’s release:
“ClearPath disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, ClearPath advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the annual percentage rate applicable to the advertised mortgage. ClearPath also misleadingly advertised rates or payments as fixed, even though the advertised mortgage was an adjustable-rate mortgage or the payment was not fixed for the indicated duration. ClearPath also misrepresented the existence, nature, or amount of cash or credit available to the consumer, and the existence or amount of fees or costs to the consumer, in connection with the advertised mortgage. The Bureau also found that ClearPath advertisements created the false impression that ClearPath was affiliated with the VA. ClearPath advertisements also failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the number and time period of payments associated with the consumer’s repayment obligations over the full term of the loan. Finally, the Bureau found that ClearPath advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing ClearPath’s name and the fact that it was not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z.”
ClearPath must pay a civil penalty of $625,000.
The consent order against ClearPath can be found here.
9/2/2020 - Accelerate Mortgage LLC was issued a consent order in relationship to violations of several rules, including UDAAP, from advertising VA loans. In their release, the CFPB stated that
“ Accelerate sent consumers mailers for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or that lacked required disclosures, in violation of the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts and practices, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. The consent order requires Accelerate to pay a civil money penalty and imposes requirements to prevent future violations.”
“The Bureau found that Accelerate disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, Accelerate advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the interest rate or payment amount applicable to the advertised mortgage and the nature or amount of cash available to the consumer in connection with the advertised mortgage. Accelerate also made misrepresentations about the existence or amount of fees or costs to the consumer in connection with the advertised mortgage. Accelerate advertisements created the false impression that Accelerate was affiliated with the government by using words, phrases, images, or designs that are associated with the VA, Internal Revenue Service, or Federal Deposit Insurance Corporation. Accelerate advertisements also falsely represented that the consumer’s access to mortgage-refinance benefits through VA-guaranteed loans was time-limited. The Bureau also found that Accelerate advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the annual percentage rate of the advertised mortgage or the consumer’s repayment obligations over the full term of the loan.”
The consent order against Accelerate requires Accelerate to pay a civil penalty of $225,000.
The consent order against Accelerate Mortgage, LLC can be found here.
9/1/2020 - Miami-based mortgage broker Hypotec, Inc. was issued a consent order by the CFPB relating to their advertising practices for VA loans. In their release, the CFPB found that
“Hypotec disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, Hypotec advertised specific credit terms, such as interest rates, APRs, and hypothetical payment amounts that it was not prepared to offer, or that it could only offer for an introductory period but advertised as if they were permanent loan terms. Hypotec’s advertisements also used phrasing and formatting that falsely represented or implied that Hypotec was affiliated with the government, including the VA, that the advertised product was endorsed, sponsored by, or affiliated with the United States government, or that the United States government was the source of the advertisements. In addition, in advertisements mailed between June 2016 and January 2019, Hypotec stated that it would pay an estimated escrow refund of a specific amount if the consumer refinanced through Hypotec, even though the advertised escrow refund amount was calculated using a method that would not yield an actual estimate for that consumer, and customers were required to fund escrow accounts upon generating a new loan. Its advertisements also falsely stated: “the Economic Stimulus Program will end soon. There is currently no plan to extend the Stimulus Program.” Finally, many Hypotec advertisements included claims or terms that require additional disclosures, but Hypotec failed to make these disclosures.”
The consent order requires Hypotec to pay a civil penalty of $50,000.”
The consent order against Hypotec can be found here.
9/1/2020 - Service 1st Mortgage was issued a consent order relating to the advertising of VA loans. In their release, the CFPB stated that :
“Service 1st disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, Service 1st advertised specific credit terms, such as APRs and hypothetical payment amounts that it was not prepared to offer, or that it could only offer for an introductory period but advertised as if they were permanent loan terms. Service 1st also used terms in millions of its advertisements that falsely represented or implied that Service 1st was affiliated with the government, including the VA, that the advertised product was endorsed, sponsored by, or affiliated with the United States government, or that the United States government was the source of the advertisements. In addition, in advertisements mailed between April 2016 and May 2017, Service 1st stated that it would pay an estimated escrow refund of a specific amount if the consumer refinanced through Service 1st, even though the advertised escrow refund amount was calculated using a method that would not yield an actual estimate for that consumer, and in cash-out transactions the “refund” was actually added to the principal of the consumer’s loan.
Service 1st also sent advertisements between December 2015 and April 2017 representing that a consumer could “[s]kip two payments” or “miss” two payments by refinancing with the company, but it did not disclose the limitations on this option, or that the skipped or missed payments would be added to the principal balance of the consumer’s loan. Its advertisements also stated: “the Economic Stimulus Program will end soon. There is currently no plan to extend the Stimulus Program,” which was untrue. Finally, many Service 1st advertisements included claims or terms that require additional disclosures, but Service 1st failed to make these disclosures.
The consent order against Service 1st requires it to pay a civil penalty of $230,000. “
The consent order against Service 1st Mortgage, Inc. can be found here.
8/26/2020 - PHLoans.com, Inc. settled with the CFPB regarding their advertising of VA-guaranteed loans. In their release, the CFPB explained the following:
“The Bureau found that PHLoans disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, PHLoans advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the payment amount applicable to the advertised mortgage and the nature or amount of cash available to the consumer in connection with the advertised mortgage. PHLoans also made misrepresentations about the existence and amount of fees or costs to the consumer in connection with the advertised mortgage. The Bureau also found that PHLoans advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan.”
The consent order against PHLoans requires PHLoans to pay a civil penalty of $260,000.
The consent order against PHLoans.com, Inc. can be found here.
8/21/2020 - Go Direct Lenders, Inc. was issued a consent order by the CFPB in relationship to advertising practices for VA-guaranteed loans. In their release, the CFPB explained the following:
“The Bureau found that Go Direct disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, Go Direct advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including advertising a lower annual percentage rate than it was prepared to offer. Go Direct also made misrepresentations about the applicable fees in connection with the advertised mortgage. Go Direct advertisements misleadingly described variable-rate loans as “fixed” rate loans, when in fact the rate was adjustable and could increase over time. Go Direct advertisements falsely stated or implied that an appraisal, assets, and income documentation were not required to qualify for certain loans and that consumers with FICO scores as low as 500 would qualify for the advertised rates.
The Bureau also found that Go Direct advertisements falsely represented that it had records showing that the value of the consumer’s property had increased over the past year by a specific percentage. Go Direct advertisements created the false impression that Go Direct was affiliated with the government by using words, phrases, images, or design characteristics that are associated with the VA or the Internal Revenue Service. Further, Go Direct advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan.”
The consent order against Go Direct requires Go Direct to pay a civil penalty of $150,000.
The consent order against Go Direct can be found here.
7/24/2020 - Both Sovereign Lending Group, Inc. and Prime Choice Funding, Inc. were issued consent orders by the CFPB for advertising practices of VA-guaranteed loans. In their release, the CFPB explained the following:
“The Bureau found that Sovereign and Prime disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, Sovereign and Prime Choice advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer. Sovereign and Prime Choice advertisements misleadingly described an advertised introductory interest rate as a “fixed” rate, when in fact the rate was adjustable and could increase over time. Sovereign and Prime Choice advertisements also created the false impression that they were affiliated with the government by using words, phrases, images, or designs that are associated with the VA or the Internal Revenue Service.
The Bureau also found that both Sovereign and Prime Choice advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing their own names and the fact that they were not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z. Sovereign advertisements made false claims about consumer’s existing loans, and falsely implied that the consumer could address these problems by obtaining a loan from Sovereign. Sovereign and Prime Choice advertisements also failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan and the period during which certain interest rates would apply. Further, Prime Choice advertisements created the false impression that they contained a property assessment as well as misleading comparisons between hypothetical credit terms and the terms of the advertised product.”
The consent order against Sovereign requires Sovereign to pay a civil penalty of $460,000.
The consent order against Prime Choice requires Prime Choice to pay a civil penalty of $645,000.
The Sovereign consent order can be found here.
The Prime Choice consent order can be found here.