CFPB CONSENT ORDER INVOLVING MORTGAGE ADVERTISING AND RESPA

The Consumer Financial Protection Bureau announced they entered into a Consent Order (File No. 2014-CFPB-0010) with Atlanta-based Amerisave Mortgage Corporation; Novo Appraisal Management Corp.; and Patrick Markert on August 12, 2014 for violating a series of laws including Section 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA), Section 8 of the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), and the Mortgage Acts and Practices Rule (MAP Rule).

The CFPB found that Amerisave Mortgage Corp., which operates primarily as an online lender, designed its website to advertise and quote mortgage rate information in a deceptive bait and switch lending manner towards consumers. The Bureau stated that Amerisave advertised specific mortgage products online by listing specific mortgage rates in rate tables publicized through the website of an unrelated third-party company (“Rate Publisher”) which compiles rate quotes and other information of mortgage lenders who use its service.

Amerisave advertised lower rates than they were actually providing to consumers but once the consumers contacted them for those rate the consumers wound up paying higher rates than what Amerisave advertised. Amerisave also ran banner or display ads on various websites advertising lower rates as well to consumers.

The CEO of Amerisave, Patrick Markert, also had an indirect beneficial ownership interest in both Amerisave and Novo Appraisal Management. The CFPB discovered that Amerisave required almost of all of its customers to use Novo for their home appraisal services. Amerisave referred and required consumers to use Novo more than 99% of the time which is a violation of RESPA Section 8(c)(2). RESPA’s Required Use of an Affiliated Business prohibition.

The Consumer Financial Protection Bureau found that Amerisave and its CEO engaged in a marketing and advertising campaign that violated The Mortgage Acts and Practices Rule. The MAP Rule provides in part that “It is a violation of this part for any person to make any material misrepresentation, expressly or by implication, or any commercial communication, regarding any term of any mortgage credit product, including but not limited to misrepresentations about (a) The interest rate charged for the mortgage credit product….(b) the annual percentage rate, simple annual rate, periodic rate, or any other rate, or (c) the existence, nature, or amount of fees or costs to the consumer associated with the mortgage credit product…”

The “Rate Publisher” which was not named in the Consent Order periodically received Amerisave’s mortgage interest rate information which the Rate Publisher published on its published rate tables. The CFPB said for a period of close to two years a systemic problem caused Amerisave to lower its mortgage rates lower than it was willing to honor on the Rate Publisher’s rate tables for “jumbo conforming loans.” Amerisave was aware that the rates they advertised were not accurate and misleading according to the Consent Order.

The Order also states that Amerisave failed to perform any sort of systemic due diligence or quality control to check the accuracy of its listed rates and that the Rate Publisher received consumer complaints about Amerisave and notified them of those complaints. The Rate Publisher also used mystery shoppers to audit the accuracy of Amerisave’s rates to which Amerisave failed the Rate Publisher’s test five times.

The interest rates Amerisave quoted on Rate Publisher also were problematic because they were based on consumers with credit scores of 800. The CFPB said the 800 credit score methodology they used to advertise and market their interest rates was not disclosed to consumers either. Additionally the advertised rates sometimes were based on consumers paying discount points as high as $10,000 which was not disclosed to consumers.

The CFPB’s Consent Order and Stipulation are very detailed and well worth reviewing for all companies involved directly or indirectly in the residential real estate industry. This is a well written consent order by the CFPB which focuses on a myriad of different compliance issues.

Amerisave, Novo, and Patrick Markert agreed to pay $19.3 million dollars as a penalty.

If you have any questions about this Consent Order, need Lender Affiliated Business Arrangement compliance guidance, or have marketing & advertising compliance questions please don’t hesitate to give us a call at the Sterbcow Law Group.