On September 1, 2020, the Consumer Financial Protection Bureau (Bureau) issued a consent order against Hypotec, Inc., a Miami-based corporation that is licensed as a mortgage broker or lender 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 campaigns. The Bureau found that, since 2016, Hypotec disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include 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. 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. In addition, 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 had no bearing on the actual escrow refund amount, and customers were required to fund a new escrow account upon generating a new loan. Hypotec 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 and imposes requirements to prevent future violations.
This action stems from a Bureau sweep of investigations of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages.
On July 24, 2020, the Bureau announced consent orders against Sovereign Lending Group, Inc., and Prime Choice Funding, Inc.; on August 21, 2020, the Bureau announced a consent order against Go Direct Lenders, Inc.; and on August 26, 2020, the Bureau announced a consent order against PHLoans.com, Inc., for similar violations.