Consumer watchdog orders $19.3 million payment for bait-and-switch mortgage scheme

The Consumer Financial Protection Bureau (CFPB) has ordered Amerisave Mortgage Corp. to pay $19.3 million for deceiving mortgage customers with a bait-and-switch loan scheme.

Atlanta-based Amerisave and its affiliate, Novo Appraisal Management Company, will provide $14.8 million in refunds to harmed consumers and pay a $4.5 million penalty that affected tens of thousands of consumers, the CFPB said on Tuesday.

The CFPB determined that Amerisave attracted customers with misleading advertising for low interest rates, locked in customers with costly up-front fees, failed to honor its advertised rates and then illegally overcharged for affiliated third-party services.

The owner of both companies, Patrick Markert, will pay an additional $1.5 million penalty.

"By the time consumers could have discovered the advertised low rates were too good to be true, they had already committed to pay hundreds of dollars to Amerisave," said CFPB Director Richard Cordray.

The agency found that between mid-2011 and this year, Amerisave posted inaccurate interest rates on its online banner ads and rate tables on third-party websites, convincing consumers into pursuing a mortgage.

Amerisave advertises and lends in all 50 states and the District of Columbia.

Consumers were given quotes based on an 800 FICO score, even if their scores were lower than that, resulting in inaccurate quotes.

Amerisave required consumers to order and provide payment authorization for an appraisal before it would provide a Good Faith Estimate (GFE) for the mortgage then delayed telling consumers that the appraisal would be done by its own affiliated company.

At closing, Amerisave also charged consumers for appraisal validation reports, overcharging for them by as much as 900 percent and without disclosing that the service would again be provided by its affiliate Novo Appraisal.

Consumers trusted that Amerisave had bargained in good faith for this third-party service, which Amerisave described as being a “special deal” for Amerisave customers.

Markert received more than $3 million dollars in indirect profit distributions as a result of requiring consumers to use Novo for marked up appraisal validations.

The CFPB order also requires Amerisave to stop advertising unavailable mortgage rates and will not be allowed to charge fees or make referrals to its affiliates before disclosing the practice to their customers.