Paramount Equity Consent Order
Paramount Equity has settled their case with the Washington State Department of Financial Institutions. Read the Consent Order here. The Statement of Charges outlined many, many violations of state and federal law:
- Using the term “mortgage bank” in their radio ads. Paramount Equity is not a bank and they are not permitted to use the words bank, mortgage bank, or in-house bank in connection with their business. (This should serve as a warning to other consumer loan companies who also like to call themselves mortgage banks.)
- Misrepresenting the availability of advertised interest rates and the APR, misrepresenting that interest rates were fixed when they were adjustable.
- Paramount Equity, in the smooth-as-caramel Hayes Barnard voice, advertised “We’ll even pay for your home to be appraised” when the cost of the appraisal was being covered by charging borrowers processing, administrative, and underwriting fees totaling more than $1700.
- Paramount Equity, in the getting-on-my-nerves Hayes Barnard voice, advertised “We’ll beat any written competitor’s rates and fees or pay you $500” without fairly explaining the nature, limitations, and conditions of this guarantee in the radio ad.
There is so much more in the final consent order including mis-using Google ad words and making inaccurate and misleading historical rate claims, and this is only the advertising portion of the Statement of Charges. Let’s move on to Deceptive Fees. Again, this is from the Statement of Charges:
- Paramount Equity disclosed its mortgage broker fee on lines 801 and 802.
Jillayne here. An average consumer would not know how mortgage brokers are suppose to disclose their fee (Line 808.) Consumers are expected to use the government forms to shop for a mortgage, but when the people who complete the government forms either don’t know how to use the form, are trained improperly, or coached to mis-use the form, then how can the government expect consumers to make informed decisions about their mortgage costs? In any event, Paramount Equity sometimes closes loans on their own credit line, and sometimes they might decide to broker a loan. In either case, their fee is disclosed on different lines. This means a consumer loan company must have systems in place to make sure their loan originators are completing the forms correctly, depending on if they were acting as a consumer loan company or as a broker.
- Hiding a significant portion of the closing costs paid to Paramount Equity by instructing their title agent, Ticor Title, to place the fees on a different page and only transferring the subtotal to the HUD-I. This means homeowners would be less likely to challenge the high fees.
- Collecting unearned fees: Disclosing a loan origination fee on line 801 of the Good Faith Estimate when the loan was going to be brokered. Paramount Equity kept the unearned loan origination fee as part of its mortgage broker fee, a violation of state and federal law.
- Unearned discount points: When Paramount Equity decided to broker the loan instead of closing it on their own credit line (their mortgage banking operation!) Paramount Equity kept the discount points as their fee and did not lower the consumer’s interest rate!
- Unearned underwriting fees: When a mortgage company brokers a loan, the LENDER is the underwriter. Paramount Equity collected an underwriting fee for itself when no underwriting services were performed.
There are 10 separate sections describing disclosure violations. The State reviewed 43 files. Some of the violations occurred in 41 of the 43 files reviewed. In 2007, there were 16 unlicensed loan originators who originated at least 52 residential loans in Washington State.
In signing the Consent Order, Paramount Equity admits no wrongdoing. But the world knows they did wrong by consumers, their regulator, and their industry.
However, there’s another way to look at this. We can look at the Paramount Equity case from the viewpoint of the corporation. The corporate mind says, “My competitors and I all agree to abide by these rules (Consumer Loan Act, Mortgage Broker Practices Act, RESPA, etc.) If I know that the majority of us will comply, then I can break the rules and while I’m breaking them, I can make hundreds of thousands of dollars. There is a chance that I will get caught. If that happens, what can I settle for? I mean, heh heh, there’s NO WAY we’ll ever go to court because the evidence against us will be overwhelming. If I can settle a state investigation for X, and I can make way more than X, then it is worth it to break the rules, if all I care about is profits. Further, I know that my state regulator will want to settle because they want my company’s revenue from our renewal fees and loan originator licensing fees.” From the corporate mindset, there was no wrongdoing. It was all a shrewd, clever business decision.
You may be thinking that I am wishing for harsher penalties. That’s not on my mind. Anytime punishment is harsh all that does is externally motivate the offenders to work even harder at not getting caught. Here is what I wish, though some would call me terribly idealistic.
I wish the mortgage industry, and by that I mean the competing consumer loan companies, the banks who grant credit lines to Paramount Equity, their mortgage broker competitors, the title and escrow companies who earn hundreds of thousands of dollars off of Paramount Equity to refuse to do business with Paramount Equity until they can prove, by way of a written, third party audit on ALL their locations in various states, that Paramount now has systems in place to train their people, compliance systems to properly disclose all fees, and that whoever was in charge of compliance and training is fired and replaced with someone of competence. Is there a board of directors at Paramount Equity? Then they should be asking who made the decisions to run the deceptive ads over and over and over again. Paramount Equity needs to set aside some of their gold to pay a competent attorney to review their radio ads and anyone who makes money off of Paramount Equity should demand this.
Paramount Equity is a member of the National Association of Mortgage Brokers. NAMB: Paramount Equity has violated 5 of the 6 provisions of your code of ethics. NAMB members should bring an ethics complaint against Paramount Equity. If I come back a year from now and see that NAMB is still collecting dues from Paramount Equity then perhaps, as we already know, the NAMB Code of Ethics is meaningless.
What do you think of their radio tag line, “Paramount Equity: Lending with Expertise!” Is this now in itself deceptive advertising? Perhaps they should formulate a new tag line. I’m sure some of our readers will offer suggestions.
Hi Terri,
Thanks for stopping by NAMF. I probably interact with a wider range of loan originators every year compared ...
By the way...sorry for such the long post for those who read it...had alot on my mind...obviously. 
Hi Jillayne,
I hope everything's good with you.
Well, Jonathan Foxx of Lenders Compliance Group has begun a series of articles regarding ...
Hi Jillayne! Truer words never spoken, RIGHT Paramount Equity???
Question for you: How do I research the status of ...
Hi Jeff I am going to take this test for the third time. I went to another 20 ...
Comment by Victoria Johnson on 16 May 2009:
I’m the incoming membership chair for NAMB. We currently do not have a Corporate Membership category. NAMB is working on a new corporate category, not yet approved. Therefore, Paramount Equity is NOT a corporate member. I will be delighted to personally look into this matter if you can give me the ACTUAL, INDIVIDUAL, member name. Do you think they could be an “industry partner”? This is not a membership, but a form of support. Let me know and I’ll look into the situation. This sounds like a serious violation of ethics.
Comment by Todd Little on 13 June 2009:
Paramount was in the wrong in this type of marketing and they knew it. Yes, this happens all the time, but Paramount DID get caught and it should be a lesson for all of us in the Mortgage Industry. Don’t play “word games” in advertising or it will came back to haunt you.
Comment by Gordon Schlicke on 27 June 2009:
Paramount was nothing more than a mass marketing machine. Look at the posted biographies of the principals. They generated volume but didn’t take care of the back office. Shortly after the DFI complaint they were on the internet looking for a compliance officer! Usually the DFI does a good job, but in this case the penalties were quite palatable. Gee, if I look contrite and pay some money I don’t have to admit any guilt. They had a good lawyer who understood that if you were a good actor at the hearing there would be plenty of cash left to pay his retainer and throw a party. The cash penalties need to be closer to maximum to keep this from happening again.
Comment by tb98629 on 11 August 2009:
I agree whole heartedly with Mr. Schlicke. The punishment does not fit the crime, shame on DFI. WHY should Paramount Equity cease? Their fines were LESS MONEY than their annual radio ad bill (I happen to know this first hand). God sakes.
Comment by TB98629 on 10 October 2009:
We filed our complaint with the Better Business Bureau and with Washington State Department of Financial Institutions. The BBB, I am happy to report, after receiving my letter, has updated their listing for Paramount Equity Mortgage under “Government Actions”. They now list the DFI settlement, and that’s good. It was a BIG DEAL for those of us who were violated. They STOLE our money, and our FUTURE money.
Paramount Equity Mortgage will tell you that they “resolved the issues with the State of Washington” and they told me personally that they, “simply had to better understand how Washington interpreted the mortgage lending laws.” I reminded them that they were not cited for minor variations from the laws, but for glaring, predatory, deceptive practices. They were ordered to pay restitution on those loans that they were caught with, but that’s not the whole story by a long shot. I was told many times that they routinely destroy borrower records after 18 months, so they could not find my records. It is my opinion that they destroy them because then government agencies cannot AUDIT them. Luckily, I have every document produced, and it will be more than enough for me to gain access to justice.
I urge you to check your closing documents for the violations outlined in the settlement charges. They are EASY to spot on your HUD1 statement, and other closing documents, you DON’T need to be an attorney. Their violations were not “dismissed” as Paramount would have you believe, they SETTLED. They DID commit these crimes, they simply said they would stop. Have they stopped? I’ll never personally know, because I will NEVER do business with them again, and I will try to rescue anyone else thinking of doing business with them. CHECK YOUR DOCUMENTS! Help is available to you, but you have to ASK for it. Good luck! TB98629
Comment by Adam Salter on 5 November 2009:
I was an employee at aparmount equity mortgage and gett screwed out of a ton of money then when I was let go, I could not get unemployement insurance. PEM is a terrible company they only care about making money. Hayes Barnyard is an idiot and an inauthentic liar. No they are looking to rip people off with solar power. I am so bitter with my experiance and can’t wait for them to get shut down.
Comment by Kelly Fiscus on 30 December 2009:
Perhaps the new tag should be Paramount Equity “Lending with Expertise at ripping the consumer off!” It sounds like they got off lightly too!
Comment by Elisa Wu on 28 February 2010:
Actually, if you read many morgage comapny’s ads on paper, you could always find one or two of the companies has similar violations like Paramount Equaty’s. It’s very educational from the opposite side for LO to conduct business with their customers in a professional and ethic way; we LO always can learn lessons from the other sides of it. It’s very interesting to read all the ads on paper about APR and how much the morgage company can give you back for your business, and some of them you can tell it’s illegal because it just too good to be true.
Pingback by To the Students from the April 6-8, 2010 20 Hr Prelicensing and Exam Prep class : National Association of Mortgage Fiduciaries on 8 April 2010:
[...] is the article I wrote regarding Paramount Equity’s Consent [...]
Pingback by Mortgage Lead Generation Firms Continue to Violate Federal and State Laws : National Association of Mortgage Fiduciaries on 15 April 2010:
[...] When clicking through, the lendgo.com lead generation site asks some simple questions like the value of my home, zip code, whether or not I’ve ever filed bankruptcy, etc. Then I’m asked to provide personal information and assured that I’m dealing with a secure website. Name address, phone number, etc. After I click “submit,” I’m told that I will be given four quotes. I clicked ’submit’ after offering them the following: First Name: Your Ad Last Name: Violates TILA But I don’t get a quote. Instead I’m asked even more questions before being told that four lenders will contact me within 24 hours: Quicken Loans, Onyx Mortgage, Americash Mortgage Bankers (I’m thinking it was a seven beer night when someone decided on that name), and….I’m totally surprised here: Paramount Equity Mortgage. [...]
Pingback by Regulators: Mortgage Lead Generation Firms are Violating State and Federal Laws | Rain City Guide on 15 April 2010:
[...] When clicking through, the lendgo.com lead generation site asks some simple questions like the value of my home, zip code, whether or not I’ve ever filed bankruptcy, etc. Then I’m asked to provide personal information and assured that I’m dealing with a secure website. Name address, phone number, etc. After I click “submit,” I’m told that I will be given four quotes. I clicked ’submit’ after offering them the following: First Name: Your Ad Last Name: Violates TILA But I don’t get a quote. Instead I’m asked even more questions before being told that four lenders will contact me within 24 hours: Quicken Loans, Onyx Mortgage, Americash Mortgage Bankers (I’m thinking it was a seven beer night when someone decided on that name), and….I’m totally surprised here: Paramount Equity Mortgage. [...]
Comment by Christopher W. Johnston on 21 May 2010:
I have heard their ads numerous times in the past and cringe each and every time I hear that voice of Hayes Barnard. We, as mortgage professionals, knew what they were up to with regards to the “free appraisals” and the $500 guarnatee, but the general public did not. Personally, it’s these types of operations that make all of our lives harder and invite more over-regulation. Truth be told, most, if not all, of the loan officers there are probably very “green” and unfotunately operate off a numbers game.
Comment by Bryce Zimmerman on 22 May 2010:
It is a shame that the penalties weren’t more severe, because that leads other bottom line driven empoyers to persue these types of lending practices. Fortunately with the 2010 gfe I don’t see how they could perform many of these types of malpractices. Realistically their will always be those types of individuals driven by greed, but typically they don’t last in a service related industry. The internet has opened the consumers eyes to reasonable costs for the majority of consumers.
Comment by Shawn Lynch on 24 May 2010:
I have to disagree with you on the stiff penalties. I wish they were stiffer. Much stiffer and against ALL owners and board members of a company that goes out to intentionally discieve and manipulate the public. Every industry insider knew that they were doing, oferring a free apprasial in one hand while charging huge fees with the other. It’s not a surprise for anyone who works in the business. But if the state is going to charge them X for breaking the law and they can make ten times X, then that should be the penalty. Ten times X.
I do agree with you on the Scarlet Letter approch, however, Banish them from accessing a warehouse lines until they can prove they have come into compliance.
When it gets down to it, some people will break the law up to the point that it’s financially apprealing to do so. So make it unappealing. Why do you think poeople deal in drugs? It’s a huge money maker and if they are caught, and the money successfully hidden, they do a little time, or a lot, but they walk out of prision rich men. It’s all a part of doing business for them. I’d hate to think my profession was the same . . .
Comment by Virginia Miller on 25 May 2010:
Seems to me they got off too easy. Just readng the radio ads sounds flaky to me. I consdier myself a very conservative person and if I heard this ad I seriously would not have paid attention to it or at least did some checking up on it. I know this comes naturally to me as I have been in banking for some time and not for othere they just wantiong a good deal. Ever hear the expression “If it sounds to good it proably is too good”. With all the new laws and the new Good Faith Estiamte 2010 this will eliminate alot of this.
Comment by Angie Williams on 27 May 2010:
Ok.. so I’m naive and live in a bubble. How can this possibly happen to this extent? I just went to their website and it states they are a member of the BBB. Seriously? Why are they allowed to operate and advertise? A slap on the hand and back out there you go? I’m confused and most certainly must be missing something here. I can’t sneeze in my office without a supervisor asking me if I re disclosed!
And they are members of a professional organization? This one will bug me for a while…
Comment by Kathleen Manford on 27 May 2010:
I have a brother in law who is always calling me wanting to know why I cant get him a rate quoted on commercials. I told him how they work and how they cover the fees. (no one works for free) I finally got tired of his questions and said go ask them! His GF started a loan with them and I went over things with him at the end, needless to say nothing was like the commercials. IF people would just remember 2 little phrases, 1. No one works for free and 2. If it looks to good to be trues…. it is! I hope that soon people will be wise enough to stand up from an escrow table and walk away when things are not as quoted. I am not afraid of licensing or testing or continuing education, bring it on.
Comment by amanda kirilenko on 31 May 2010:
I guess my first question is, are they still operating in Washington? It is the age old concept that if you have enough money you buy just about anything.
Pingback by What You Want To Hear? « HighTechLending, Don Davis on 9 July 2010:
[...] you might find this interesting as it is written by one of our industries continuing education leaders. http://mortgagefiduciaries.com/2009/05/paramount-equity-consent-order/ [...]
Pingback by To the Students from the July 13-15, 2010 Prelicensing Class in Tacoma : National Association of Mortgage Fiduciaries on 15 July 2010:
[...] a link to he article on Paramount Equity that I referenced in [...]