Plano, Texas-based W.R. Starkey Mortgage LLP will pay $4.5 million to settle claims that the company unlawfully steered consumers into loans they could not afford on overpriced modular homes.
North Carolina Attorney General Roy Cooper alleged that Starkey worked with Phoenix Housing Group Inc. to improperly qualify borrowers for loans and finance the sales of manufactured homes and land at inflated prices. The lender provided the loans to North Carolina consumers who bought homes from Phoenix Housing Group between January 2007 and September 2008.
Starkey employees and agents failed to verify financial information provided by Phoenix about borrowers, disguised the source of the information, placed inaccurate information on consumers' credit reports to boost their ability to qualify for loans, made loans without regard to borrowers' ability to repay, and added discount points to mortgages without reducing the interest rate as required by law, according to Cooper's allegations.
Under a consent judgment between Starkey and Cooper's office, Starkey has agreed to pay $4.45 million to 171 families who purchased mobile or manufactured homes from Phoenix. The company will also pay $125,000 for consumer education and to cover the costs of the enforcement action, and $25,000 to the Western Piedmont Council of Government to help provide financial counseling to consumers who receive refunds under the settlements.
Starkey is permanently barred from making loans when a manufactured-housing dealer is a party to the deal, collecting financial information about prospective borrowers from anyone other than the borrowers, and charging discount points unless requested and paid by a borrower to reduce the interest rate.
Cooper filed suit in November 2009 against Starkey, Phoenix and a third company, K&B Homebuilders, as well as several individuals connected with the companies. The case against Phoenix and K&B remains active.