The Consumer Financial Protection Bureau (CFPB) says it has taken action against Amerisave Mortgage Corp.; its affiliate, Novo Appraisal Management Co.; and the owner of both companies, Patrick Markert, for engaging in a deceptive bait-and-switch mortgage lending scheme.
The bureau found that Amerisave lured consumers by advertising misleading interest rates, locked them in with costly upfront fees, failed to honor its advertised rates and then illegally overcharged them for affiliated ‘third-party’ services.
"By the time consumers could have discovered the advertised low rates were too good to be true, they had already committed to pay hundreds of dollars to Amerisave," explains Richard Cordray, CFPB director.
Amerisave and Novo will provide $14.8 million in refunds to harmed consumers and pay a $4.5 million penalty. Patrick Markert will pay an additional $1.5 million.
Amerisave, an Atlanta-based online mortgage lender, advertises and lends in all 50 states and the District of Columbia. Between mid-2011 and 2014, the CFPB says, Amerisave advertised its interest rates and terms using online banner ads and searchable rate tables on third-party websites. The bureau found that Amerisave posted inaccurate rates on these banner ads and rate tables, inducing consumers to pursue a mortgage with Amerisave.
When consumers were directed to Amerisave's own website, the lender gave consumers quotes based on an 800 FICO score, even where consumers had previously entered a FICO score below 800 on the third-party website that led them to Amerisave. This resulted in misleadingly low quotes for the consumers, the bureau says.
According to the CFPB, Amerisave required consumers to order and give payment authorization information for an appraisal before it would provide a good faith estimate for the mortgage and did not tell consumers until later that the appraisal orders were being referred to its own affiliated company.
At closing, Amerisave also charged consumers for "appraisal validation" reports, without disclosing that the service was provided by its affiliate, Novo Appraisal Management Co., and that Novo had marked up the reports by as much as 900%. Consumers trusted that Amerisave had bargained in good faith for this third-party service, which Amerisave described as being a "special deal" for Amerisave customers, according to the bureau.
In addition to the monetary penalties, the company must now implement a quality control program and retain an independent consultant to review its advertising practices.
The full text of the CFPB's consent order can be found here.