The Consumer Financial Protection Bureau announced Aug. 12 that it fined mortgage lender Amerisave Mortgage Corp., its affiliate, Novo Appraisal Management Company, and the organizations’ collective owner, Patrick Markert, $19.3 million for allegedly luring prospective borrowers with misleading interest rates and trapping them with inflated appraisal fees.
The CFPB claimed that the lender and its affiliated AMC violated the Truth in Lending Act and Real Estate Settlement Procedures Act by enticing tens of thousands of borrowers with deceptive advertising and then illegally overcharging them for third-party services.
The CFPB alleged that starting in 2011, Amerisave began advertising inaccurate interest rates online, and once borrowers were on Amerisave’s website, it gave quotes to consumers based on an 800 FICO score, even when consumers disclosed a lower credit score.
After borrowers were attracted by the promise of low interest rates, Amerisave required borrowers to order and give payment authorization information for an appraisal before it would offer a “Good Faith Estimate” for the mortgage. Amerisave then referred the appraisal orders to Novo under the guise of a “special deal” for consumers without shopping around to other third-party providers and without disclosing to the prospective borrowers its affiliated relationship with Novo. Amerisave leveraged this relationship with Novo to charge consumers for “appraisal validation” reports, which Novo marked up by as much as 900 percent.
The CFPB alleged that Markert received more than $3 million in indirect profits from the alleged “appraisal validation” scheme.
“Amerisave lured consumers in with deceptive advertising, trapped them with costly upfront fees and then illegally overcharged them for services from an undisclosed affiliate,” Richard Cordray, CFPB director, said in a statement. “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.”
The CFPB has ordered Amerisave and Novo to pay $14.8 million to refund consumers, in addition to a $4.5 million penalty. Markert has been ordered to personally pay a $1.5 million penalty for his part in the scheme.