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CFPB continues enforcement with VA lenders

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Friday, September 25, 2020

The Consumer Financial Protection Bureau (CFPB) has issued a consent order against three more mortgage companies accused of targeting servicemembers and veterans with deceptive loan advertisements.

The CFPB’s latest consent order was filed Sept. 2 against Accelerate Mortgage, LLC, a Delaware limited liability corporation that is licensed as a mortgage broker and lender in about 31 states.

Accelerate offers and provides mortgage loans guaranteed by the Department of Veterans Affairs (VA). Accelerate’s principal means of advertising VA-guaranteed loans is through direct-mail advertisements sent primarily to U.S. military servicemembers and veterans.

The bureau found 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 of $225,000. It also imposes injunctive relief to prevent future violations, including requiring Accelerate to bolster its compliance functions by designating an advertising compliance official who must review its mortgage advertisements for compliance with mortgage advertising laws prior to their use; prohibiting misrepresentations similar to those identified by the bureau, and requiring Accelerate to comply with certain enhanced disclosure requirements to prevent future misrepresentations.

The action against Accelerate was the seventh case stemming from a bureau sweep of investigations of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages.

Another CFPB enforcement action saw a consent order filed Sept. 1 against Service 1st Mortgage, Inc., a mortgage broker based in Glen Burnie, Md., that is licensed in about 12 states. The consent order requires Service 1st to pay a $230,000 civil money penalty and imposes requirements to prevent future violations.

The bureau found that, since December 2015, 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 U.S. government, including the VA.

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” actually was added to the principal of the consumer’s loan, according to the CFPB.

Finally, the third enforcement action saw the CFPB file a consent order Sept. 1 against Hypotec, Inc., a mortgage broker based in Miami that is licensed in eight states. The company sent consumers numerous mailers that contained false, misleading and inaccurate statements or that lacked required disclosures. The conduct occurred since 2016, the bureau said.

Specifically, 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.

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.

The consent order against Hypotec requires the company to pay a $50,000 civil penalty and bolster its compliance functions by designating an advertising compliance official who must review its mortgage advertisements for compliance with mortgage advertising laws prior to their use; prohibiting misrepresentations similar to those identified by the bureau, and requiring Hypotec to comply with certain enhanced disclosure requirements to prevent future misrepresentations.

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