Lomas & Nettleton Charged With Consumer Fraud
Lomas & Nettleton Co., the nation’s second-largest mortgage company, has been charged with consumer fraud for enticing home buyers in Pennsylvania by offering one mortgage rate and then delivering a higher rate.
State Atty. Gen. LeRoy S. Zimmerman on Friday filed suit in Commonwealth Court charging the company with a pattern of “deceptive conduct” in its operations this year and with violations of the state Unfair Trade Practices and Consumer Protection Law and the Loan Broker Trade Practices Regulations.
A Lomas & Nettleton spokesman said the company had acted within its contractual rights and denied any wrongdoing.
The state’s action against the Dallas-based firm is the first of its kind since Zimmerman’s office enacted emergency regulations last year to combat widespread abuses of the mortgage industry.
The company, which has seven offices in the state and services 37,000 mortgages valued at more than $750 million in Pennsylvania, is specifically charged with misrepresenting mortgage rates to consumers, failing to honor loan commitments, failing to disclose that mortgage rates are not guaranteed and granting mortgages to unqualified customers.
The suit alleges that the company would promise a customer a specific mortgage rate, take an application fee of $175 or more and then raise the mortgage rate, forcing the customer to accept the change or forfeit the fee.
“The abuses alleged in this suit and in the pending consumer complaints are a virtual repeat of the widespread abuses which last year led to our promulgating the mortgage broker regulations,” Zimmerman said in a statement. “And like last year, consumers are complaining to us that the mortgage they get is not the one they were promised.”
The state’s action seeks payment by the company to affected customers and damages.
Since the beginning of the year, 89 complaints against the company have been filed by consumers from the Allentown, Erie, Philadelphia and Pittsburgh areas, according to Deputy Atty. Gen. Douglas P. Yauger, director of the agency’s Bureau of Consumer Protection.
Jim Sabin, corporate counsel for Lomas & Nettleton, said he had not seen the complaint filed by the attorney general, but he acknowledged that interest rates were increased for some customers in Pennsylvania after they signed their contracts.
Sabin said the applications contained provisions that made the loans subject to certain conditions, including the potential for an increase in the interest rates before settlement.
“It’s in the (application) papers,” Sabin said. “We just deny any wrongdoing. We believe that we are operating under our contractual rights as contained in the application the (consumers) signed.”
Yauger agreed that the applications refer to the potential for interest rates to increase before settlement, but he said they are “very deep in the contract” and are “written in language that is very difficult for even a lawyer to understand.”
