A national home lender is accused of using bait-and-switch tactics, overcharging prospective borrowers for services provided by its appraisal management company and not disclosing third-party affiliation.
The allegations were made Tuesday by the Consumer Financial Protection Bureau, which said in a press statement that it has reached a consent order with Amerisave Mortgage Corp.
The Atlanta-based mortgage banker operates online. It advertises and lends in all 50 states as well as in Washington, D.C.
According to the regulator, Amerisave advertised misleading and inaccurate interest rates online to lure in prospective borrowers.
Even though borrowers listed their FICO scores at less than 800 on third-party websites where Amerisave advertised, they were still quoted rates on Amerisave’s own website that were based on scores of at least 800.
The CFPB said some of the rates advertised were “simply not available.”
Borrowers were also required to pay costly up-front fees to lock in the rates even though Amerisave failed to honor the advertised rates.
This practice, which went on from 2011 through 2014, violated the Mortgage Acts and Practices rule, or MAP rule.
“By the time consumers could have discovered the advertised low rates were too good to be true, they had already committed to pay hundreds of dollars to Amerisave,” CFPB Director Richard Cordray stated in the announcement.
Before Amerisave would provide Good Faith Estimates, borrowers were required to provide payment information for an appraisal validation report. This violated the Truth-in-Lending Act and the Real Estate Settlement Procedures Act.
Consumers were illegally overcharged for affiliated third-party services provided by affiliate Novo Appraisal Management Co. Even though the cost of the reports averaged $20, clients were charged $100.
However, customers weren’t advised that the AMC was an affiliate of Amerisave — a RESPA violation — or that Novo had marked up the cost of the “appraisal validation” reports by as much as 900 percent.
Amerisave allegedly failed to disclose that the service wasn’t actually being handled by Amerisave but being referred out to Novo. This went on until 2012.
“Consumers trusted that Amerisave had bargained in good faith for this third-party service, which Amerisave described as being a ‘special deal’ for Amerisave customers,” the bureau stated.
The markups earned more than $3 million for Patrick Markert, who owned both companies.
Credit report costs were allegedly marked up as much as 350 percent.
According to the CFPB, tens of thousands of consumers were harmed by Amerisave’s practices.
Amerisave, Novo and Markert all agreed to the consent order.
The order requires Amerisave and Novo to refund $14.8 million to harmed consumers. In addition, Amerisave will pay a $4.5 million penalty and Markert will personally pay a $1.5 million penalty.
Amerisave agreed in the consent order to cease advertising unavailable mortgage rates and stop charging illegal fees.
