Mortgage Brokers Claimed Government Ties in Deceptive Advertising

Mortgage Brokers Claimed Government Ties in Deceptive Advertising

February 16, 2015

A federal regulator is taking action against three mortgage companies for claiming to be associated or endorsed by the federal government in their advertising.

The Consumer Financial Protection Bureau (CFPB) is suing one company and settling complaints with two others for misleading consumers with advertisements that imply the U.S. government approved their products.

While government programs insure or guarantee certain mortgages, like FHA or VA loans, the private lenders that make these loans are not government entities and are not affiliated with the U.S. government.

The agency filed a complaint against Maryland-based mortgage broker All Financial Services for allegedly using advertisements that appeared to be from, or affiliated with, a government entity. The advertisements also implied that the FDA-insured reserve mortgage was time-limited or had a deadline.

Advertisements also claimed that reverse mortgage borrowers wouldn't have to make monthly payments, when in fact borrowers still have to pay taxes and insurance. The reverse mortgage could also be due upon the death of the last borrower, regardless of whether a non-borrowing spouse still lived in the home.

Utah-based mortgage broker Flagship Financial Group is prohibited from falsely implying a government affiliation and will pay a civil penalty of $225,000. Between August 2011 and December 2012, the company sent mailings implying that its VA loans were endorsed or sponsored by the U.S. Department of Housing and Urban Development (HUD). The company was not HUD-approved at the time of the mailings and had no other affiliation with the government other than originating VA-guaranteed loans.

Similarly, American Preferred Lending will pay a civil penalty of $85,000. The California-based company sent mailings that appeared as if they were government notices, including government logos and web addresses. While the company originates VA and FHA loans, it is not affiliated with the government.