CFPB shutters Majestic Home Loan for misleading VA marketing practices

The Consumer Financial Protection Bureau shut down RMK Financial Corporation, which does business as Majestic Home Loan, for repeated use of misleading marketing materials. The government watchdog also slapped the Ontario, California-based lender with a $1 million fine. 

The CFPB made the decision to close Majestic Home Loan after the mortgage lender violated a 2015 order, which fined the lender $250,000 for sending deceptive advertisements to "tens of thousands of military families." The flyers falsely claimed that the mortgage lender was affiliated with the Department of Veterans Affairs and the Federal Housing Administration.

Despite the order, the practices have continued, CFPB's Director Rohit Chopra said in a written statement Monday.

"Even after the 2015 law enforcement order, RMK continued to lie to military families by falsely implying government endorsement of its home loans," said Chopra. "Our action reflects our commitment to weed out repeat offenders, and we are shutting down this outfit for good."

The government watchdog also alleges that Majestic deceived borrowers about interest rate and key terms, falsely misrepresented loan requirements and lied about projected savings from refinancing.

Majestic Home Loan did not respond to a request for comment.

All in all, the CFPB estimates that "millions of advertisements" have been distributed by the lender using the names and logos of the VA and the FHA in a way that falsely implied that the advertisements were sent by the VA or FHA, or that the company or the advertised mortgage products were endorsed or sponsored by the VA or FHA. 

This in turn has harmed military families, violated the 2015 order, the Consumer Financial Protection Act, the Mortgage Acts and Practices Advertising Rule and the Truth in Lending Act, the CFPB alleges. 

The agency added in its press release that this is "one in a series of actions" that it will be taking to halt repeat offenders. In December, the CFPB proposed a rule that would require nonbanks to report any state and local court orders or judgments involving consumer financial products to the bureau, which it would pool into a database of violators that would be available to the public.

Meanwhile, in 2021, the CFPB conducted numerous investigations of mortgage companies that used deceptive mailers to advertise VA-guaranteed mortgages. More than $4.4 million was obtained in civil money penalties as a result of this sweep, the CFPB said.

RMK, which was founded in 1997, laid off most employees in mid-January via Skype and closed shop on January 31, sources familiar with the matter said. Over 60 employees were impacted.

According to employees let go, the announcement that the lender would be shutting its doors came unexpectedly. Company executives told employees that the company would be closing due to a "legacy issue."