The Federal Trade Commission has charged a group of Colorado-based mortgage brokers with violating federal laws by deceptively claiming they will refinance consumers’ mortgages at the lowest rates available at no cost to the consumer.

The FTC alleges that instead of receiving a low-rate mortgage, many consumers have been stuck with high-interest-rate loans, had liens placed on their property, incurred damage to their credit ratings and in some cases faced the beginning of foreclosure proceedings. At the FTC’s request, a U.S. district court judge has issued a temporary restraining order barring the defendants’ alleged illegal business practices and freezing their assets.

According to the FTC’s complaint, a group of corporate and individual defendants sometimes known as PWR Processing Inc., have run ads in newspapers in several states including California and Colorado, as well as on their Web site, claiming “Free 10, 15, 20, 25, or 30-year fixed” mortgages at “today’s rate” with “no costs – no kidding.” The FTC alleges that consumers who contacted the defendants received additional oral and written claims, including “nothing else can or will be added to the loan amount…” and “all closing costs to be paid from the broker rebate.”

The FTC’s complaint states the defendants tell consumers that to get a “no-fee” loan, they will need to go through a process of multiple refinances, which involves applying for two or more loans, one at a competitive rate and one at a higher-than-market rate. The defendants allegedly claim that lenders on the higher-than-market-rate loans will pay a premium to the mortgage broker and that those payments will be used to pay the fees associated with the low-interest loans. The defendants also allegedly tell consumers that the low-interest loan then will be used to pay off the higher-interest loan, leaving the consumer with a no-fee, low-interest loan.

The FTC charges that, instead of giving consumers “no-fee,” low-interest home mortgages, the defendants have left consumers with high-interest loans, sometimes at rates higher than the loans they sought to refinance. The FTC also alleges the defendants did not pay appraisal and other fees, leaving appraisers free to file liens on the properties they appraised. Additionally, many consumers, believing they did not have to make payments on their higher-interest loans, have allegedly found the loans appear as delinquencies on their credit reports, damaging their credit rating. The FTC also charges the defendants falsely claim that they are licensed as mortgage loan brokers in the state of California.

The FTC’s complaint names Phillip W. Ranney; Armor Mortgage; Abacus Mortgage; Community Homebanc Mortgage Services Inc.; Harbor Pacific Funding Inc.; High Center Inc.; Lending Strategies of Colorado Inc.; Lite Realty Corp.; PWR Processing Inc., dba First Source America Mortgage Corp. dba NexLoan; PWR Press Inc.; and Source Funding Company, Colorado corporations; Kace, LLC dba Aristocrat Mortgage, a Colorado limited liability company; and Mortgage Watch, a California corporation, as defendants, and Kathleen A. Ranney as a relief defendant.

The FTC files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. A court will decide the case.


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