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.