(Phoenix, Ariz. - Oct. 29, 2010) Attorney General Terry Goddard today announced a $1.15 million settlement with Home Loan Center, Inc. over allegedly deceptive advertising of payment option adjustable rate mortgage loans (“POAs”).
According to the complaint filed by the Attorney General in conjunction with the settlement, from August 2004 through July 2007, Home Loan Center marketed POAs to Arizona consumers, advertising mortgages with low teaser rates, overemphasizing the supposed benefits of POAs, and downplaying or simply not disclosing their significant risks, such as negative amortization and the resulting increase in the principal balance of the loan. Home Loan Center estimates it mailed over 600,000 ads to Arizona consumers in this time period. It ultimately entered into 389 POA loan transactions with Arizona borrowers and then quickly sold those loans to other investors.
This settlement concerning POA loans follows an agreement that the Attorney General’s Office reached with Wells Fargo Bank earlier this month, relating to POA loans marketed by Wachovia Corporation and Golden West Corporation. Goddard stated that payment option adjustable rate mortgages are “among the most dangerous loan products” because borrowers who are already underwater typically face substantial bill shock when their loans are recalculated. “With today’s settlement, I am taking another step in prosecuting those companies who have misrepresented risky loans to Arizona borrowers,” Goddard said.
Goddard noted that he intends to continue to pursue lenders that have deceptively marketed these structurally unsound loans, which have often led to foreclosures and have negatively impacted families and Arizona’s economy.
The settlement provides for $1.15 million to “assist with the Attorney General’s efforts to prevent or mitigate foreclosures and to prevent mortgage or loan modification fraud.” Home Loan Center also has agreed that if it decides to offer POAs in the future, it will provide advance notice to the Attorney General and ensure that its product advertising will clearly disclose the risks of such loans to consumers.
Goddard urged all homeowners who are in or who are facing foreclosure to seek assistance as soon as possible. Homeowners can speak with a HUD-approved housing counselor by calling the Arizona Foreclosure Helpline, toll-free, at 1-877-448-1211. Borrowers who believe they have been the victim of mortgage fraud or other scams should contact the Attorney General’s Office at 602-542-5763. Additional foreclosure prevention resources are available on the Attorney General’s website, www.azag.gov.
A copy of the agreement is attached. For more information, contact Steve Wilson at (602) 542-8351.