A home builder accused of deceiving prospective borrowers about the true cost of their residential loans has agreed to a settlement.
Heritage Home Group advertised 100 percent, low-cost mortgages in newspapers, on flyers, through direct mail and on web sites.
The Jamison, Pa.-based company’s ad said that buyers who purchased one of its properties could choose from three options including “$0 for paid closing costs.”
“ZIP. ZERO. NADA,” the ad stated in a bold headline.
In fine print, the ad said that the financing was available through the U.S. Department of Agriculture Rural Development Program.
But the ads were misleading, according to the Federal Trade Commission.
“It deceived consumers by advertising low-cost mortgages while hiding fees and not disclosing vital information about the true cost of the mortgages,” the FTC alleged in an announcement Tuesday.
In addition to a good faith deposit, home buyers were required to pay settlement costs and an annual fee, the FTC claims.
Monthly payments of $1,198 were advertised even though such payments were only available for USDA-qualified buyers.
In addition, annual percentage rates weren’t disclosed.
Heritage is accused of violating the Federal Trade Commission Act; the Mortgage Acts and Practices Advertising Rule and Regulation N; and the Truth in Lending Act and Regulation Z.
A settlement reached between Heritage and the FTC prohibits the home builder from further misrepresentations and requires it to keep a record of advertising to demonstrate that it is complying with the order.
While the settlement also includes a $650,000 civil penalty, it was suspended “because of the operation’s poor financial condition.”
A stipulated order for permanent injunction and civil penalty judgment was filed in federal court on Friday.
