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Feds take action against mortgage companies for implying they’re government approved

CFPB_2tone_Horiz_RGBThe Consumer Financial Protection Bureau took action Thursday against three mortgage companies for misleading consumers with advertisements implying U.S. government approval of their products.

The bureau is suing reverse mortgage lender All Financial Services, seeking to halt its illegal activities. The bureau is also ordering Flagship Financial Group and American Preferred Lending to end their false advertising.

The bureau alleges that mailings by All Financial Services, American Preferred Lending, and Flagship Financial Group looked like U.S. government notices.

Although government programs ensure or guarantee certain mortgages, the private lenders that make these loans aren’t government entities and aren’t affiliated with the U.S. government.

All Financial Services

The bureau alleges that from November 2011 to December 2012, All Financial Services used advertisements that were deceptive. It alleges that the company misrepresented that the FHA-insured reverse mortgage program was had a deadline.

For example, one mailer sent to nearly 200,000 consumers advertising All Financial Services’ reverse mortgages had an eagle resembling the seal of the United States. In addition, the header read, “GOVERNMENT LENDING DIVISION” and “Housing and Recovery Act of 2008 Eligibility Notice.”

The bureau also alleges that the company falsely said that no monthly payments are required “whatsoever” under a reverse mortgage “as long as you and your spouse live in the home.”

The bureau said this ad is misleading because (1) homeowners who take out a reverse mortgage are still required to pay taxes and insurance, and (2) at the time the ads were sent out, the reverse mortgages they advertised could be due upon the death of the last borrower, regardless of whether a non-borrowing spouse still lived in the home.

Flagship Financial Group

The bureau investigation found that from August 2011 to December 2012 the company sent mailings implying that its VA loans were endorsed or sponsored by the U.S. Department of Housing and Urban Development.

The company claimed, in more than 1 million mailers, that it was “HUD-Approved.” For example, the ads included text about federal legislation, and said, “HUD-Approved Flagship Financial Group has been directed to get VA homeowners instant relief by lowering their monthly payments.”

The company also sent tens of thousands of mailers advertising mortgage credit products that looked like a government notice. For example, the mailings had a heading, “PURSUANT TO THE FEDERAL HOUSING ADMINISTRATION (FHA) HUD No. 12-045,” instructed consumers to call their “assigned FHA loan specialist.”

American Preferred Lending

The bureau’s investigation found that American Preferred Lending, from August 2011 to February 2013, sent mailings to potential consumers that appeared as if they were U.S. government notices. More than 100,000 mailings were sent that had an FHA-approved lending institution logo, and listed the web address,


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