Colorado officials have launched an investigation to stop mortgage originators from using deceptive advertising -- a practice contributing to the state's leading foreclosure rate.
"This is a preliminary type of investigation and we are not ready to sue anybody," Jason Dunn, Colorado deputy attorney general, told MortgageDaily.com. "We are still in a fact gathering mode."
In addition to the average advertising that usually comes to mind, such as newspaper, radio or TV, it is also about mortgage lender and broker practices.
"Some of the cases we are looking at are more of oral misrepresentations by the lenders," Dunn said. "In many cases though, it is obvious that the consumer has made inappropriate decisions and now is looking to place blame on the broker after getting in trouble with loans."
Consumers have filed 66 complaints with the Denver/Boulder Better Business Bureau this year. Mortgage companies in the complaints include Mortgage Planning and Lending Specialists, Jupiter Lending and Altus Real Estate. The latter two have been sued by former customers for alleged violations of the state Consumer and Protection Act and the Truth in Lending Act.
Jupiter and Altus did not return calls for comment.
BBB spokeswoman Susan Leihe said lax state regulations led to the surfacing problems, rising number of complaints and misleading advertisements. According to state and federal laws, an advertiser is not required to disclose all the different factors that impact an advertised mortgage interest rate. An advertiser can only advertise rates that are actually available, but is not required to advertise all its rates.
"We think, misleading advertising is a direct contributor to people getting into loans that they cannot afford and that explains the high foreclosure rate in Colorado," Leihe said. "A consumer sees a rate in the newspaper, calls on a broker and then finds out that in the closing that it is not the real rate."
In September, the state had one new foreclosure filing for every 408 households -- the highest rate in the nation and 2.5 times the national average, according to RealtyTrac's U.S. Foreclosure Market Report.