WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (Bureau) issued a consent order against Hypotec, Inc., a mortgage broker based in Miami, Florida that is licensed in eight states. Hypotec offers and provides mortgage loans guaranteed by the United States Department of Veterans Affairs (VA). Hypotec advertises its VA-guaranteed loans to United States military servicemembers and veterans through direct-mail advertisements. The Bureau found that in advertising VA-guaranteed mortgages Hypotec sent consumers numerous mailers that contained false, misleading, and inaccurate statements or that lacked required disclosures, in violation of the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts and practices, the Mortgage Acts and Practices—Advertising Rule (MAP Rule), and Regulation Z. The consent order requires Hypotec to pay a civil money penalty and imposes requirements to prevent future violations.
Today’s action is the fifth case stemming from a Bureau sweep of investigations of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages. The Bureau commenced this sweep in response to concerns about potentially unlawful advertising in the market that the VA identified. This ongoing sweep of investigations reflects the Bureau’s commitment to enforcing the laws that ensure the financial marketplace is fair and accurate for all consumers, including servicemembers, veterans, and surviving spouses whom VA-guaranteed mortgages are designed to benefit.
The Bureau found that, since 2016, Hypotec disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, Hypotec advertised specific credit terms, such as interest rates, APRs, and hypothetical payment amounts that it was not prepared to offer, or that it could only offer for an introductory period but advertised as if they were permanent loan terms. Hypotec’s advertisements also used phrasing and formatting that falsely represented or implied that Hypotec was affiliated with the government, including the VA, that the advertised product was endorsed, sponsored by, or affiliated with the United States government, or that the United States government was the source of the advertisements. In addition, in advertisements mailed between June 2016 and January 2019, Hypotec stated that it would pay an estimated escrow refund of a specific amount if the consumer refinanced through Hypotec, even though the advertised escrow refund amount was calculated using a method that would not yield an actual estimate for that consumer, and customers were required to fund escrow accounts upon generating a new loan. Its advertisements also falsely stated: “the Economic Stimulus Program will end soon. There is currently no plan to extend the Stimulus Program.” Finally, many Hypotec advertisements included claims or terms that require additional disclosures, but Hypotec failed to make these disclosures.
The consent order against Hypotec requires Hypotec to pay a civil penalty of $50,000. The consent order also imposes injunctive relief to prevent future violations, including requiring Hypotec to bolster its compliance functions by designating an advertising compliance official who must review its mortgage advertisements for compliance with mortgage advertising laws prior to their use; prohibiting misrepresentations similar to those identified by the Bureau; and requiring Hypotec to comply with certain enhanced disclosure requirements to prevent future misrepresentations.
The other consent orders stemming from the sweep can be found here: https://www.consumerfinance.gov/policy-compliance/enforcement/actions/hypotec-inc/
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.