|Five mortgage brokers operating in Colorado have settled allegations of deceptive advertising. Another broker settled charges of mortgage fraud.
The state's Attorney General John Suthers announced the settlements today.
Three of the firms -- Arbor Financial Inc., 5280 Financial Group and Mortgage Toolbox -- ran advertisements in mortgage sections of the Denver Post and Rocky Mountain News. The ads featured option adjustable-rate mortgage programs with low teaser rates.
The state claims that disclosures of true interest rates and other loan terms were either buried in the fine print or not included at all.
"Several of the brokers interviewed during the course of these investigations remarked that these advertisements 'made the phones ring,'" the announcement said.
Each of the companies has agreed not to advertise option-ARM programs. Instead, they will advertise only traditional fixed-rate loans or traditional ARMs. They have also agreed to include disclosures about material loan terms in readable print.
In addition, the three brokers have agreed to provide each borrower with a copy of the Consumer Handbook on Adjustable Rate Mortgages at least 24 hours before each closing.
Another broker, Home Mortgage Solutions, is accused of marketing option-ARMs through direct mail without disclosing the associated risks or prepayment penalties. Teaser rates were allegedly marketed as permanent. A civil claim has reportedly been filed under the Colorado Consumer Protection Act against Home Mortgage and its three owners -- Toan Le, An Nguyen, and Leonard Smith.
California-based mortgage broker Tri-Point Realty settled with the Colorado attorney general over claims it tried to mislead prospects with mailings that appeared to be from their banks.
Encore Lending LLC and one of its owners, Paul Baker, settled charges of mortgage fraud, the press release said. Baker allegedly deposited funds into his customers' accounts and inflated their incomes to help them qualify.