Feb 26, 2008 7:04 pm US/Mountain
Attorney General Cracks Down On Mortgage Fraud
DENVER (CBS4) ―
The Colorado Attorney General's Office is cracking down on mortgage fraud. The target: ads from mortgage brokers.
The ads have been appearing in newspapers. The attorney general's office is investigating 13 companies.
One investigation involves a mortgage broker in Arapahoe County that the attorney general claims deceived, misled and financially injured Colorado consumers.
The case involves people seeking new mortgages and those who were re-financing at a lower rate. They saw ads in Denver newspapers and the rates were appealing -- promising fixed rate mortgages. One ad stated, "We ask that you refrain from kissing our loan officers."
Attorney General John Suthers said such ads are often not what they seem.
"If you look at them, you would be led to believe you could get a fixed rate loan at some extremely low rate," Suthers said.
His lawsuit claims the advertised rates were not fixed, but rather teaser rates that would re-adjust in one to three months.
The company being sued is Wholesale Mortgage Lending in Centennial. It also goes by Jupiter Lending and numerous other names.
Instead of an easy mortgage, Suthers said some borrowers ended up with "payment shock" once the rates re-adjusted. The monthly payments would balloon to twice as much as the teaser rates and there were penalties if they wanted to pay the loan off early.
According to the lawsuit the homeowners didn't learn about this until the closing and then were told it could be changed later. Suthers has issuing a warning.
"You cannot often tell what the terms of a loan are when you look at an advertisement, and they use the term fixed rate very loosely when in fact they are talking about a variable rate loan," Suthers said.
CBS4's Rick Sallinger went to the offices of Wholesale Mortgage Lending, but no one came to the door and calls were not returned.
Chris Holbert, president of the Colorado Mortgage Lenders Association, said he welcomes the legal action.
"We think when people, whether they are in the industry or outside, violate the law, law enforcement should go after those people and those entities fairly aggressively," Holbert said.
If found guilty, the mortgage company would face $2,000 to $10,000 fines for each violation.
The principles of Wholesale Mortgage Lending are also being sued in Denver federal court by a borrower who claims they were misled. The defendants claim that suit is without merit.
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