Home Mortgage Refinance Services:
Mortgage Broker Barred from "Deceptive Claims"

Deceptive Claims that Company Could Refinance Consumers' Home Mortgages: FTC

A federal district court has barred a mortgage broker from making false claims about home mortgage refinance services and ordered him to pay consumer redress. This action follows FTC charges that he violated federal laws. According to FTC, the defendant and his company deceptively claimed they could refinance consumers' home mortgages at the lowest available rates at no cost to consumers.

In May 2004, FTC filed a complaint against Phillip W. Ranney and a group of corporate defendants, operating as PWR Processing, Inc. FTC charged that defendants promised consumers "no-fee," low-interest home mortgages following a process of multiple home loan refinances. According to FTC's complaint, defendants told consumers that if they applied for two loans, one at a competitive rate and one at a higher-than-market rate, lenders on the higher-than-market rate loans would pay a premium to the mortgage broker that in turn would be used to pay fees associated with the lower-interest loan. Defendants allegedly claimed that the low-interest loan would then be used to pay the higher-interest loan, leaving the consumer with a low-interest, "no-fee" loan. FTC charged that instead of receiving the promised loan, consumers were stuck with high-interest home loans, often at rates higher than they wanted to refinance.

Home Mortgage Financing

In August 2004, the court entered a default judgment against the corporate defendants. The judgment barred defendants from misrepresenting:

1. that they can provide home mortgage financing at competitive, low-interest rates;
2. that the fees associated with processing consumers' loan applications will be paid at no cost to the consumers;
3. that consumers will not be required to make any payments on an interim loan because they will be funded by a lower-interest loan or paid by the lender; and
4. that they are a licensed mortgage broker.

Judgment Also Barred Violations of TILA or Reg Z

By Advertising Credit Terms Other Than Those Actually Offered

The judgment also barred defendants from violating the Truth in Lending Act (TILA) or Regulation Z by advertising credit terms other than those that actually will be offered.

Judgment Bars Misrepresentations about Home Mortgage Financing

The terms of the recent litigated judgment are similar to those in the default judgment against the corporate defendants. The judgment bars Phillip Ranney from making misrepresentations about home mortgage financing and violating TILA and Regulation Z and orders him to pay $128,300 in consumer redress.

What This Shows

This district court ruling shows the willingness of the federal courts to take action in cases involving allegations of deceptive advertising claims in the home mortgage refinance area.

(FTC v. Phillip W. Ranney, et al., United States District Court, District of Colorado, Civil Action No. 04-f-1065 (MJW), FTC File No. X040053, March 28, 2005.)

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