Background
Low Rates is a mortgage lender and broker providing mortgages guaranteed by the United States Department of Veteran Affairs that engages in direct-mail advertising campaigns to military servicemembers and their families . Millions of advertisements were sent out that , according to the consent order , were deceptive , misleading and violated Regulation Z .
Miscellaneous Representations
Credit Terms : The lender was found to not offer mortgages with the credit terms promoted in its advertisements . For example , Low Rates sent 573,500 mailers to consumers advertising a mortgage with a simple-interest rate of 2.25 % for three years and an annual percentage rate ( APR ) of 3.196 %. However , the advertised APR was not actually offered .
CFPB Issues Advertising Consent Orders
On Oct . 26 , 2020 , the Consumer Financial Protection Bureau ( CFPB ) issued a consent order against Low VA Rates , LLC ( Low Rates ) for direct-mail mortgage advertising violations . Low Rates was ordered to pay a civil money penalty of $ 1,800,000 . The 51-page consent order is similar to the previous eight consent orders issued to entities advertising VA-guaranteed mortgages . So far , $ 4.4 million in civil money penalties has been assessed to nine entities for mortgage advertising compliance violations .
Doeren Mayhew will take a closer look at the ninth consent order and examine the violations committed in this article to help your institution avoid committing the same violations .
Cash-Outs : Low Rates sent 151,675 mailers advertising a “ cash-out ” credit terms , which it did not actually arrange or offer . The advertisement stated the borrower could “ take $ 20,000 cash-out for only $ 87.48 per month !” However , obtaining any cash-out amount against the consumer ’ s home equity was possible only if the consumer had an existing mortgage and refinanced the entire amount owed as part of a cash-out refinance mortgage , resulting in a total monthly payment larger than $ 87.48 .
Fixed Rates : At one point , 1,141,690 mailers prominently referring to a 1.75 % fixed simple annual interest rate were mailed in an envelope that stated , “ Payment Reduction Entitlement Notice .” The mailer used rhetorical questions to advertise a 1.75 % fixed rate , such as “ Does your VA loan have a fixed rate of over 1.75 %?”, “ Why stay at a rate that is higher than 1.75 %?” and “ These low rates can ’ t last long !”. In reality , Low Rates did not offer a 1.75 % fixed rate , which the mailer ’ s fine print confirmed .
Cash Refunds : Mailers sent to 26,241 individuals promoted a “ CASH refund from current lender .” The lender failed to disclose the cash refund would be limited to the funds in the consumer ’ s escrow account and they would be required to fund a new escrow account with Low Rates .
Comparisons
Low Rates violated Regulation Z ( 12 C . F . R . § 1026.24 ( i )( 2 ) ( i )) by misleadingly comparing consumers ’ payments and
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