Minnesota AG sues Source Lending over 'bait-and-switch' tactics

Chris Rizo Aug. 14, 2008, 4:10pm

Lori Swanson (D)

ST. PAUL, Minn. -- Minnesota Attorney General Lori Swanson has filed a lawsuit against a mortgage broker she says made false promises to homebuyers.

The lawsuit against Source Lending Corp. was filed Thursday in Hennepin County District Court.

In the complaint, Swanson alleges the Plymouth, Minn.-based company used "bait-and-switch" tactics to sell adjustable rate and "interest-only" mortgage loans.

She said the company promised consumers low initial fixed interest rates and low initial payments, but what consumers got were adjustable interest rates.

"Source Lending engaged in the very types of abuses that created the mortgage lending crisis that has hurt both homeowners and the American economy," Swanson said.

She also accused the company of baiting customers into refinancing their home by offering such things as low fixed rates or no closing costs, and then at closing "switched" to a less favorable set of loan terms.

On its Web site, the company says it specializes in "fast, hassle-free closings."

The lawsuit seeks to bar Source Lending from mortgage brokering and order the company to pay restitution to consumers.

Swanson is also seeking civil penalties up to $25,000 per violation of the state's consumer protection laws.

For the month of July, Minnesota ranked 33rd among states in terms of mortgage foreclosure filings, according to Irvine, Calif.-based RealtyTrac Inc., which compiles foreclosure data.

From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.

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