Bait-and-Switch Scam Bites Online Mortgage Lender

Casey Fleming

I will try not to gloat as I write this. Often when I am quoting interest rates and fees clients will tell me that they’ve seen better rates or prices from online mortgage lenders. Since I can broker to almost every mortgage lender in the country, and since we all get our money from the same pool, I always have my doubts about the veracity of online quotes.  How can you tell if an online quote from a mortgage lender is a scam?

It's natural to want to shop for the best deal on a mortgage
It’s natural to want to shop for the best deal on a mortgage

My clients have mentioned Amerisave more than once in this context. Now it turns out that I wasn’t the only one to suspect that they were using a bait-and-switch marketing scam. The Consumer Finance Protection Bureau (CFPB) has taken action against the company and its owner. The be specific:

Aug 12 2014

CFPB Orders Amerisave To Pay $19.3 Million For Bait-And-Switch Mortgage Scheme

Owner Patrick Markert to Pay Additional $1.5 Million for Deceiving Consumers

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) took action against Amerisave Mortgage Corporation, its affiliate, Novo Appraisal Management Company, and the owner of both companies, Patrick Markert, for engaging in a deceptive bait-and-switch mortgage-lending scheme that harmed tens of thousands of consumers. The Bureau found that Amerisave lured consumers by advertising misleading interest rates, locked them in with costly up-front fees, failed to honor its advertised rates, and then illegally overcharged them for affiliated “third-party” services. Amerisave and Novo will provide $14.8 million in refunds to harmed consumers and pay a $4.5 million penalty. Patrick Markert, as an individual, will pay an additional $1.5 million penalty.

"You want low interest rates? I got REALLY low interest rates!"
“You want low interest rates? I got REALLY low interest rates!”

Amerisave lured consumers in with deceptive advertising, trapped them with costly upfront fees, and then illegally overcharged them for services from an undisclosed affiliate,” said CFPB Director Richard Cordray. “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. Today’s action puts an end to Amerisave’s unacceptable bait-and-switch scheme and holds Patrick Markert personally responsible for his illegal actions.”

Amerisave required consumers to order and give payment authorization information for an appraisal before it would provide a Good Faith Estimate (GFE) for the mortgage, and did not tell consumers until later that the appraisal orders were being referred to its own affiliated company. At closing, Amerisave also charged consumers for “appraisal validation” reports, without disclosing that the service was provided by its affiliate Novo Appraisal Management Company, and that Novo had marked up the reports by as much as 900 percent. 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.

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. The CFPB’s order requires Amerisave, Novo, and Markert to take the following actions:

  • Pay $14.8 million in consumer refunds: Amerisave and Novo must provide $14.8 million in refunds to the consumers harmed by the false advertising, impermissible fees, and illegal referrals during the period covered by the order. The Bureau will administer the refunds and the amount each eligible consumer will receive will vary based on how much that consumer paid Amerisave. A third-party settlement administrator will be contacting eligible consumers once a restitution process is established.
  • Stop advertising unavailable mortgage rates: The order requires Amerisave to ensure that it will not engage in deceptive mortgage advertising practices. Those practices include, but are not limited to, advertising unavailable rates on third-party searchable rate tables, advertising deceptive rates in its banner ads, and giving consumers mortgage quotes based on an undisclosed 800 credit score. Amerisave will implement a quality control program and retain an independent consultant to review its advertising practices.
  • No longer charge illegal fees: Amerisave will not charge fees or make referrals to its affiliates before giving consumers the proper disclosure forms.
  • Pay $6 million in fines: Amerisave will make a $4.5 million penalty payment, and Patrick Markert will make an additional $1.5 million penalty payment, to the Bureau’s Civil Penalty Fund.

The full article can be found here.

Consumer Financial Protection Bureau
CFPB Produces Regulations to Protect Consumers

The most important lesson here is that there is no “special deal” available to you just because the lenders is “super efficient.” I’ve said this many times and it’s still true – we all draw our money from the same pool, and have the same people involved in the process that have to get paid. Whether they all work at one large company with large overhead, or several small ones with more nimble structures, there are a lot of folks involved to complete a complicated transaction, and that’s what you pay for.

The good news is there’s a new sheriff in town – the CFPB – and they seem to be doing an outstanding job.

Casey Fleming, Author of The Loan Guide: How to Get the Best Possible Mortgage, available on Amazon.

Mortgage Advisor, C2 Financial Corp.

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