PHOENIX (Legal Newsline) - Arizona Attorney General Terry Goddard announced on Friday that his office has reached a $1,150,000 settlement with a mortgage broker that allegedly engaged in fraudulent mortgage services.
Home Loan Center, Inc., allegedly used deceptive advertising of payment option adjustable rate mortgage loans in the period of August 2004 through July 2007.
Goddard alleges that the company advertised mortgages with low teaser rates, overemphasized the supposed benefits of POAs and downplayed or never disclosed the risks associated with them. Those risks included negative amortization and the resulting increase in the principal balance of the loan, Goddard says.
Home Loan Center estimates that during the dates identified in the lawsuit, it sent mailers to more than 600,000 Arizona consumers. As a result, it allegedly entered into 389 POA loan transactions with borrowers from the state, and these loans were then sold to other investors.
Under terms of the settlement, Home Loan Center is required to alert the Attorney General's Office if it decides to offer POAs in the future. It must also clearly disclose the risks of such loans to consumers in the future.
"With today's settlement, I am taking another step in prosecuting those companies who have misrepresented risky loans to Arizona borrowers," Goddard said.
Goddard added 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.
The money Home Loan Center will pay as part of the settlement will go towards Goddard's future efforts to prevent or mitigate foreclosures and to prevent mortgage or loan modification fraud.
Goddard reached a similar agreement with Wells Fargo Bank earlier this month concerning POA loans marketed by Wachovia Corporation and Golden West Corporation.