The Colorado attorney general’s office will subpoena at least 10 area mortgage brokers and companies during the next few weeks in an investigation of possibly deceptive advertising practices, a prosecutor in the office said.
The office is focusing on mortgage companies that advertise low teaser interest rates, tout minimum-loan-payment plans and use confusing terms to describe their loans, said Jan Zavislan, deputy attorney general for consumer protection.
Advertising for mortgages runs in Denver’s major daily newspapers and on many radio and TV stations. Brokers also market loans on websites and through telemarketing. Some feature interest rates of as little as 1 percent and other special offers, with details often provided in fine print.
The investigation could result in the state’s filing civil lawsuits against mortgage brokers found to have violated the Colorado Consumer Protection Act. The act forbids brokers from advertising “any false, misleading or deceptive statement with regard to rates, terms or conditions for a mortgage loan.”
But companies that cooperate with the state and clean up their advertising will not be sued, Zavislan said. Those that don’t could face a fine of up to $2,000 per violation, he said.
“It is all part of stopping the worst practices and making consumers more financially literate,” Zavislan said. “We want to drive home the point that a 1 or 2 percent interest rate is just a teaser rate designed to get you in the door, and that there’s really no such thing as a 30-year fixed-interest mortgage at that rate.”
He would not say which brokerages will receive subpoenas. The office is targeting those that have generated the most complaints, he said.
Deceptive tactics by brokers are helping fuel Colorado’s foreclosure problem, Zavislan said. The state’s foreclosure rate has led the nation for seven months, according to RealtyTrac.
Industry groups praised the state’s action.
“We are thrilled at the prospect there would be greater enforcement of existing law,” said Chris Holbert, president of the Colorado Mortgage Lenders Association. “We think that addresses the competitive disadvantage that most mortgage brokers and mortgage bankers have suffered because most don’t advertise interest rates.”
Customers of mortgage companies have filed 66 complaints with the Denver/Boulder Better Business Bureau this year, more than in any other business category, BBB spokeswoman Susan Liehe said. Misleading advertising is a leading complaint, as are sales practices, customer service and product issues.
Some Denver-area mortgage companies – including Jupiter Lending, Altus Real Estate, and Mortgage Planning & Lending Specialists – have received at least five complaints each during the last 12 months, according to BBB records.
Two of those companies – Jupiter and Altus – have been sued by former customers for alleged violations of the state Consumer Protection Act and the Truth in Lending Act.
Altus recently settled its case, filed in Adams County District Court in 2005, court records show. The Jupiter case is pending in U.S. District Court in Denver. The plaintiffs have been unable to locate Jupiter owner Jerry Johnson, according to court filings.
Johnson could not be reached by The Denver Post on Wednesday. Leo Shifrin, owner of Mortgage Planning & Lending, which the BBB said is a related business to Jupiter, did not return a call.
Altus owner Ferren Rajput did not return a call Wednesday. But he told The Post in September that Altus takes customer complaints seriously.
“Our policy as a company is to handle our customer complaints in ample time and try to resolve them. We have resolved many of them,” Rajput said.
Staff writer Greg Griffin can be reached at 303-954-1241 or ggriffin@denverpost.com.
BBB complaints
Complaints to the Denver-Boulder Better Business Bureau about metro-area mortgage brokers:
66 this year
158 in the last 12 months
583 in the last three years
