A South Florida mortgage lender whose owner has an extensive history in regulatory encounters may lose its license for engaging in predatory lending practices, including misleading advertisements. Some of the ads allegedly led listeners to believe negatively amortizing adjustable rate loans were fixed rate and fully amortizing.
The Florida state Office of Financial Regulation announced it filed a complaint against First Mortgage America Inc., doing business as The Financial Group Inc., to seek revocation of the company's mortgage lending license and other penalties.
"Regulators should be commended for taking swift and severe action against a company that has been preying on Florida consumers," the regulator's chief financial officer Tom Gallagher said in a written statement.
The state said it began examining The Financial Group's activities and its owner, Blair Wright, after receiving more than 50 complaints from consumers, who alleged, in part, that the Fort Lauderdale-based lender engaged in misleading advertisements, misrepresentation of loan terms and conditions, and misrepresentation of fees.
The company used frequent radio ads that led potential borrowers to believe that the very low interest-rates mentioned were for fixed-rate mortgages although they were for adjustable-rate mortgages, according to the examiners. The loans were structured in monthly payments that did not sufficiently cover the monthly principal and interest payment, resulting in an increase in the loan balance rather than a decrease. Additionally, the mortgage lender failed to disclose or underestimated the total costs that would be incurred in obtaining the loans.
"It's the same generic ad" that has been used since the company's inception in February 1998 and reviewed by the Department on five separate occasions since then, Wright told MortgageDaily.com. "Our ads have always met state regulations and the one time the department has asked us to expand our disclosure, we've gone ahead and done so."
"We look forward to our day of representation at the state hearing," the executive added.
Wright has had "an extensive history" of operating through multiple mortgage companies and encounters with regulatory authorities for deceptive practices that date back to more than a decade ago, the Office said.
In 1991, state financial examiners visited U.S. Financial Center, of which Wright was vice president, to investigate an advertisement in the Fort Lauderdale Sun-Sentinel for a fixed-rate mortgage with no points paid at closing. It was determined that the points were being charged in the form of a second mortgage financed over five years. Investigators additionally found that four open complaints where the loans had not closed, but collection of a mortgage broker fee had been attempted.
In 1992, as part of a stipulation and consent agreement, Wright agreed to pay $5,000 for distribution of misleading ads and promotional materials. In 1994, another company operated by Wright was advertising loans available under the Hurricane Andrew Relief bond program, which offered low-cost loans after the disaster. Investigators said the firm was not an approved lender of the state-run program, yet mortgage applications and checks made out to the bond fund were found in the company's files.