Blog LenderLaw Watch September 23, 2020

CFPB Continues to Target Misleading VA Mortgage Loan Advertisements

On September 14, 2020, the Consumer Financial Protection Bureau (CFPB) announced a settlement in its eighth case arising out of the CFPB’s “sweep of investigations” of mortgage companies allegedly mailing deceptive advertisements for VA-guaranteed mortgages to servicemembers and veterans.  According to the CFPB, the “ongoing sweep of investigations reflects the Bureau’s commitment to enforcing the laws that ensure the financial marketplace is fair and accurate for all consumers, including servicemembers, veterans, and surviving spouses whom VA-guaranteed mortgages are designed to benefit.”

The CFPB’s focus on protecting servicemembers and veterans is in line with general enforcement trends in the industry over the last several years.  As Goodwin previously reported in its Consumer Finance 2019 Year In Review, federal and state agencies focused their enforcement efforts primarily on protecting vulnerable populations from discrimination.  One-fourth of all actions were brought under either the Fair Housing Act or Servicemembers Civil Relief Act (SCRA).  Federal agencies demonstrated their commitment to servicemembers and veterans in particular through, among other things, the Department of Justice’s Servicemembers and Veterans Initiative.  Last year, many other actions were not brought under a statute specifically designed to protect minorities or servicemembers but reflected similar themes—for example, the CFPB sued a lender for submitting data to the Bureau that misrepresented the race, ethnicity, and sex of certain loan applicants.

In less than two months—between July 24, 2020 and September 14, 2020—the CFPB announced eight similar settlements:

  • First and second, on July 24, 2020, the CFPB issued consent orders against California-based mortgage companies Sovereign Lending Group, Inc. and Prime Choice Funding, Inc. for allegedly mailing advertisements for VA-guaranteed mortgages that misrepresented credit terms; misleadingly described an introductory interest rate as “fixed,” when the rate was in fact adjustable and could increase over time; created the false impression that they were affiliated with the government; and failed to adequately disclose that they were not acting on behalf of consumers’ current lenders.
  • Third, on August 21, 2020, the CFPB issued a consent order against California-based mortgage company Go Direct Lenders, Inc. for allegedly mailing advertisements for VA-guaranteed mortgages that advertised an lower interest rate than the company was prepared to offer; misleadingly described adjustable-rate mortgages as “fixed” rate loans; stated or implied that an appraisal, assets, and income documentation were not necessary to qualify for certain loans; 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; and created the false impression that they were affiliated with the government.
  • Fourth, on August 26, 2020, the CFPB issued a consent order against California-based mortgage company PHLoans.com for allegedly mailing advertisements for VA-guaranteed mortgages that stated credit terms that the company was not actually prepared to offer to the consumer; misrepresented the existence and amount of fees or costs to the consumer in connection with the advertised mortgage; and failed to disclose credit terms for the advertised mortgage.
  • Fifth and sixth, on September 1, 2020, the CFPB issued consent orders against Florida-based mortgage company Hypotec, Inc. and Maryland-based mortgage company Service 1st Mortgage, Inc. for allegedly mailing advertisements for VA-guaranteed mortgages that advertised specific credit terms that it was not prepared to offer, or that it could only offer for an introductory period; created the false impression that they were affiliated with the government; misleadingly stated that it would pay an estimated escrow refund of a specific amount if the consumer refinanced through them; and claimed that “the Economic Stimulus Program will end soon. There is currently no plan to extend the Stimulus Program.”
  • Seventh, on September 2, 2020, the CFPB issued a consent order against Delaware-based mortgage company Accelerate Mortgage, LLC f or allegedly mailing advertisements for VA-guaranteed mortgages that misrepresented the credit terms of the advertised loan; misrepresented the existence or amount of fees or costs to the consumer in connection with the advertised mortgage; created the false impression that Accelerate was affiliated with the government; and failed to disclose certain required terms.
  • Eighth, on September 14, 2020, the CFPB issued a consent order against California-based mortgage company ClearPath Lending, Inc., or allegedly mailing advertisements for VA-guaranteed mortgages that stated credit terms that the company was not actually prepared to offer to the consumer, including by misrepresenting the annual percentage rate applicable to the advertised mortgage; 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; 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; ated the false impression that ClearPath was affiliated with the VA; and failed to adequately disclose that they were not acting on behalf of consumers’ current lenders.

To date, the CFPB has ordered these eight mortgage companies to pay a total of more than $2.6 million in civil money penalties and comply with various provisions for injunctive relief.  The CFPB continues to describe this as an “ongoing” effort, suggesting that more enforcement actions may be on the way against additional mortgage lenders and brokers.