Settlement reached over N.C. home loans

Keith Loria Aug. 3, 2010, 12:11pm


RALEIGH, N.C. (Legal Newsline) - North Carolina Attorney General Roy Cooper announced on Monday that he has reached a $4.5 million settlement with a mortgage lender accused of violating state housing laws.

Cooper's lawsuit against Texas-based W.R. Starkey Mortgage LLP alleged that the company orchestrated a scheme to sign North Carolina customers up for loans on overpriced modular and manufactured homes from Phoenix Housing Group that they were likely unable to pay back.

Consumers who signed on for loans from Jan. 2007-Sept. 2008 wound up with loans that exceeded their home's actual value, Cooper alleged.

According to Cooper's lawsuit, Starkey worked with Phoenix to qualify borrowers for these loans and finance the sales of homes and land at inflated prices.

"A family should have the opportunity to buy a home without inflated prices and questionable financing," Cooper said. "I'm pleased that consumers who fell victim to this scheme now have a chance to get money back."

Many of Starkey's employees and agents were accused of not verifying financial information about the Phoenix loan borrowers, disguising the source of information, boosting consumers' credit reports with inaccurate information and not reducing interest rates when adding discount points to mortgages.

Once Starkey officials learned of the alleged fraud, they agreed to changes, including offering refunds to 171 families in the amount of $26,000 each.

The company also agreed to pay $125,000 for consumer education and to cover the costs of the enforcement action and provide another $25,000 to the Western Piedmont Council of Government for any consumers seeking financial counseling after receiving their settlements.

Furthermore, Starkey is now barred from making loans when a manufactured housing dealer is a party to the deal and can no longer collect financial information about prospective borrowers from anyone except the borrowers themselves.

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