Mortgage Daily

Published On: June 3, 2004
Brokers’ Assets Frozen Over Deceptive Ads

FTC complaint alleges deceptive business practices

June 3, 2004

By PATRICK CROWLEY

The ad looked hard to resist.“Free 10, 15, 20, 25 or 30-year Fixed” mortgages at “Today’s Rate” with “NO COSTS-NO KIDDING.”

But the joke turned out to be on borrowers who, according to a federal complaint, were left with high-interest loans, damaged credit and liens on their homes.

A group of Colorado mortgage brokers led by a man named Phillip W. Ranney have been accused by the Federal Trade Commission (FTC) of running bogus ads in California, Colorado and several other states and engaging in deceptive business practices.

And now a federal judge has stepped in, barring those accused from continuing to operate and freezing their assets.

A complaint filed in U.S. District Court in Denver accuses Ranney and the others of “violating federal laws by deceptively claiming they will refinance consumers’ mortgages at the lowest rates available at no cost to the consumer.”

Instead, the FTC alleges in a written statement, “many consumers have been stuck with high-interest loans, had liens placed on their property, incurred damage to their credit ratings and, in some cases, faced the beginning of foreclosure proceedings.”

At the FTC’s request a federal judge in Denver has issued a temporary restraining order that bars the defendants from continuing to conduct business. The judge also froze the assets of Ranney and the others, who sometimes operated under the name PWR Processing Inc.

Ranney could not be reached to comment. But he told KOAA, a Colorado Springs television station, that he will aggressively fight the federal lawsuit and maintains he has done nothing wrong.

Ranney also claims to have thousands of satisfied customers, according to a story posted on the television station’s Web site.

But federal regulators tell a different story.

The FTC alleges that when consumers answered Ranney’s ads they were told in writing and verbally that “nothing else can or will be added to the loan amount” and “all closing costs to be paid from the broker rebate.”

But then, the FTC claims, customers were told that to get a “no-fee” loan they would have to through a process that included multiple refinances. That included applying for two or more loans, one at a competitive rate but the other at a subprime rate.

Ranney’s group then told customers that “lenders on the higher-than-market rate loans will pay a premium to the mortgage broker and that those payments will be used to pay the fees associated with the low-interest loans,” the FTC said.

“The defendants allegedly tell consumers that the low-interest loan then will be used to pay off the higher-interest loan, leaving the consumer with a no-fee, low-interest loan,” the FTC alleges.

But instead borrowers have been “stranded with high-interest loans, in many cases at rates higher than the loans they sought to refinance,” the FTC said.

In addition, Ranney’s group did not pay for appraisals or other fees, which resulted in appraisers filing liens against the borrowers’ property. Many borrowers, believing they did not have to make payments on their high-interest loans, discovered that the loans were showing up as delinquent on their credit reports.

And Ranney’s company was not even licensed to do business in California, the FTC said.

The FTC has asked the court to “permanently bar the defendants’ illegal business practices” and award the consumers financial damages.


Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: [email protected]

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