Arbor Financial, Inc., Denver, Colorado, and 5280 Financial Group, and Mortgage Toolbox, Centennial, Colorado, have agreed to settlements with the Colorado Attorney General John Suthers that will eliminate the deceptive use of teaser rates mortgage loan advertisements.

Each of the three companies ran ads in the “Mortgage Marketplace” sections of the Denver Post and Rocky Mountain News, advertising low teaser rates and/or low minimum monthly payments associated with option ARM loans. Disclosures of true interest rates and other terms were buried in agate footnotes, if included at all. Several of the brokers interviewed during the course of these investigations remarked that these advertisements “made the phones ring.”

As part of the settlements, each of the brokers has agreed to advertise only traditional fix rate loans or traditional ARMs, not option ARMs. The firms also have agreed to include certain disclosures about material loan terms in readable print. Finally, the brokers must ensure at least 24-hours prior to closing, each borrower will be provided with a copy of the Consumer Handbook on Adjustable Rate Mortgages.

The Attorney General has filed civil claims under the Colorado Consumer Protection Act against Home Mortgage Solutions, Inc., Englewood, Colorado, and three associated individuals: owners Toan Le (aka James Le) and An Nguyen, and general manager Leonard Smith.

Home Mortgage Solutions allegedly used direct mail to market risky option ARM loans to borrowers without disclosing the associated risks. The complaint alleges that Home Mortgage Solutions misrepresented the low introductory rate as a permanent interest rate, and made refinancing nearly impossible with prepayment penalties, facts which Home Mortgage Solutions failed to disclose to borrowers.

In another action, Attorney General Suthers has reached a settlement with Englewood’s Encore Lending, LLC, and one of its owners, Paul Baker, for depositing money into borrow accounts and inflating their incomes to qualify them for larger loans. Baker has agreed to surrender his mortgage broker license.

The Attorney General has also reached a settlement with Sacramento, California-based mortgage broker Tri-Point Realty, which sent letters to Colorado homeowners that appeared to be from a homeowner’s bank. The letters urged the homeowner to refinance to take advantage of his home’s increased value. Tri-Point, however, had no affiliation with the lender and did not conduct any research to determine if the home had actually increased in value.

Mail that appears to come from the government or a homeowner’s bank is more likely to opened and considered by the homeowner, and thus places honest advertisers at a disadvantage. The settlement prohibits Tri-Point from further misrepresentations in its advertisements.