Two Fayetteville companies that deceived consumers into buying manufactured homes and land they couldn't afford have been ordered not to close any loans pending a hearing on Monday, Attorney General Roy Cooper announced.
"These companies mislead their customers every step of the way, from the initial sales pitch to the closing," said Cooper. "As a result, home buyers get stuck with mortgage payments they can't afford on overvalued properties."
Cooper filed suit against CMR Properties and Home Town USA of Fayetteville on Thursday for deceptive sales and lending practices related to the sale of land/home packages. Also named in the complaint are managers Christopher P. Wollin, Jason Gonzales and Kendrick Jackson and former sales associate Wendell Lindo. In addition, the complaint names Blaine Stowe, a mortgage broker who arranged financing for CMR and Home Town customers, and Jerry Honeycutt, a former appraiser who conducted inflated appraisals for the companies, as defendants. All defendants are North Carolina residents.
At a hearing late Thursday, Wake County Superior Court Judge Donald Stephens ordered the defendants not to close any loans pending a preliminary injunction hearing set for Monday, August 1, 2005. Cooper is also asking the court to permanently bar the defendants from deceiving consumers, entering into contracts with customers who they know do not qualify for financing, falsifying loan applications, arranging inflated land appraisals, failing to disclose the cost of loans, and any other unfair practices related to the sale of land or manufactured homes in North Carolina. Cooper is seeking cancellation of all CMR and Home Town's contracts, refunds for consumers and civil penalties.
As alleged in the complaint, CMR and Home Town sell land/home packages that include manufactured homes and parcels of land in Cumberland, Moore and Robeson counties. CMR advertise the companies' land/home packages in local newspapers and via the Internet at www.gotohometown.com, soliciting customers with credit problems and people who have just moved to North Carolina and need to find housing quickly.
According to Cooper's complaint, consumers who contacted CMR were asked how much they could afford to pay in monthly rent and then told that they could purchase a land/home package for that amount. CMR told consumers who weren't able to qualify for financing that they could purchase a home through the companies' "Sponsorship Program" by finding a sponsor, usually a friend or older relative. After a year, the companies claimed, the buyer's credit rating would improve and they would be able to refinance the home and drop the sponsor from the mortgage. CMR led buyers and sponsors to believe that they would both be cosigners on the loan. However, the mortgage turned out to be solely in the sponsor's name and not in the buyer's name at all, meaning that the buyer didn't really own the home and wouldn't be able to refinance the loan.
Cooper alleges that CMR also misled customers who purchased land/home packages without using the "Sponsorship Program." At the loan closing, home buyers frequently learned for the first time that their loan costs and monthly payments would be hundreds of dollars higher than CMR had told them. When buyers complained, they were told that they could refinance the home after a year to lower their payments.
However because the companies had appraised the homes at inflated rates, it would be nearly impossible to refinance the loans. In some cases, CMR had allowed buyers to live rent-free in a mobile home while waiting to move into their new home. Many of these consumer felt pressured to follow through with the purchase despite changes in costs because they had nowhere else to move.
Cooper also contends that CMR falsified down payments and information on loan applications without customers' approval in order to secure loans.
A total of 10 consumers complained to Cooper's office about Home Town and CMR's practices. Other consumers who wish to file a complaint can contact the North Carolina Attorney General's Consumer Protection Division.