The Consumer Financial Protection Bureau took action Tuesday against Amerisave Mortgage Corp., affiliate firm Novo Appraisal Management Company and Patrick Markert - the owner of both companies - for an alleged bait-and-switch mortgage-lending scheme.
The CFPB found that Amerisave lured consumers by advertising misleading interest rates, locked them in with upfront 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 consumers and pay a $4.5 million penalty. Markert will pay an additional $1.5 million penalty.
The actions ordered by the CFPB include:
Pay $14.8 million in consumer refunds: Amerisave and Novo must provide $14.8 million in refunds to consumers harmed by false advertising, impermissible fees and illegal referrals.
Stop advertising unavailable mortgage rates: The order requires Amerisave to ensure it will not engage in deceptive mortgage advertising practices. The 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 Bureaus Civil Penalty Fund.
Amerisave, an Atlanta-based online mortgage lender, advertises and lends in all 50 states and the District of Columbia. Between mid-2011 and 2014, Amerisave advertised its interest rates and terms using online banner ads and searchable rate tables on third-party websites.
The CFPB found that Amerisave posted inaccurate rates on these banner ads and rate tables, inducing consumers to pursue a mortgage with Amerisave.
When consumers were directed to Amerisaves website, Amerisave gave consumers quotes based on an 800 FICO score, even when consumers had entered a FICO score below 800 on the third-party website that led them to Amerisave. This resulted in Amerisave offering many consumers misleadingly low quotes.
According to the CFPB, Amerisave required consumers to order and give payment authorization information for an appraisal before it would provide an estimate 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 and that Novo had marked up the reports by as much as 900%. Consumers trusted that Amerisave had bargained in good faith for this third-party service, which Amerisave described as being a special deal for customers.
"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," said CFPB Director Richard Cordray. "Todays action puts an end to Amerisaves unacceptable bait-and-switch scheme and holds Patrick Markert personally responsible for his illegal actions."