CFPB Hits Mortgage Lender Over 'Bait-and-Switch' Scheme

WASHINGTON Amerisave Mortgage Corp. and its owner have been ordered to pay more than $20 million for allegedly overcharging borrowers and trapping them in higher interest rates than those advertised.

The Consumer Financial Protection Bureau's order issued Tuesday claims the mortgage lender, an affiliated appraisal company and the owner of both enterprises, Patrick Markert, misled consumers with a "bait-and-switch mortgage scheme."

Amerisave and its affiliated Novo Appraisal Management Company consented to pay $4.5 million in penalties and refund $14.8 million to affected consumers. Markert will pay an additional $1.5 million penalty.

"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 in a press release. "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."

Between the middle of 2011 and 2014, the CFPB said, Amerisave posted inaccurate and inconsistent interest rates in banner ads and rate tables shown on third-party websites directing consumers to the company's own website. The bureau also said consumers were promised interest rates based on credit scores that were higher than they had received. Amerisave also required the consumer to authorize payment for an appraisal before receiving a Good Faith Estimate. The consent order alleges that Amerisave did not disclose to the consumer that Novo was an affiliated company until after the consumer had authorized payment for an appraisal.

According to the CFPB order, the lender also charged consumers for "appraisal validation" reports provided through Novo without informing them that the appraisal company had marked up the cost of the reports by as much as 900%.

"By leading customers to believe they were already obligated to pay such costly fees, often $400 or more, Amerisave restricted consumers' ability to shop for alternative products and better prices," the CFPB said in the press release. "Amerisave also marked up the cost of credit reports by as much as 350%, prior to giving consumers a GFE."

The bureau ordered Markert to pay an individual penalty on charges that he received more than $3 million in indirect profit distributions for requiring consumers to get "appraisal validations" through Novo.

The CFPB has ordered Amerisave to stop advertising misleading interest rates and to stop charging consumers referral fees without disclosing affiliate relationships. It must also hire an independent consultant to review its advertising practices and implement a quality control program. The $14.8 million in refunds that Amerisave and Novo must provide will vary per person depending on how much each consumer paid to the companies, the CFPB said.

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Comments (4)
Hmmm they must have disclosed something incorrectly because there is nothing wrong with an affiliate charging a market fee for a service. It sounds like they didn't disclose the affiliation correctly, so brought the weight of the law down. It surprises me, though, that they collected appraisal fees before issuing the GFE. I think they must have thought their "cost estimate system" sufficed as a GFE. Everyone offers the lowest rates online and hardly anyone actually gets those rates... Amerisave is a smaller version of Quicken, right?
Posted by tmortgman | Wednesday, August 13 2014 at 2:01PM ET
where have the repsa cops and our knoweledgable CFPB goons been with this type of behavior going on RIGHT UNDER THEIR NOSES. EVERY mortgage pro has screamed they cant do that with regard to rate quotes, they violated RESPA by refusing to disclose prior to 600 fee, increased fees at closing...a lousy 1.5Mil fine for this guy? why are they in business?
Posted by john m | Wednesday, August 13 2014 at 1:52PM ET
Its about time. They have been low balling for years and I complained to Zillow, Bank rate and every one else who they advertised with. No one did any thing even though they had to have known.
Posted by Gregory H | Wednesday, August 13 2014 at 11:44AM ET
Amerisave should be shuttered !!! There's NO room.....ZERO.....for this kind of practice in our vitally important housing finance industry and there can be NO DOUBT that Amerisave acted intentionally !
They should be made an example of in order to send the proper message to those considering similar behavior that continues to erode consumer confidence.
Posted by John D | Wednesday, August 13 2014 at 11:06AM ET
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