PHOENIX (CN) – The Arizona attorney general claims that Pulte Home Corp., the nation’s largest homebuilder, defrauds consumers by informing them they have “pre-qualified” for financing at a certain interest rate, and provided Spanish-speaking customers with different disclosures than English speakers.
Pulte also falsely claimed that its loans were comparable to those of other lenders, and that customers could “obtain earnest money deposit refunds,” the state says.
Attorney General Terry Goddard claims that Pulte told customers during its “oral ‘pre-qualification'” process that they could afford a Pulte-made home, but failed to deliver one, since Pulte’s pre-qualification process is “mainly used to identify how much home consumers can afford and to promote Pulte Mortgage.”
Pulte offers “purchase price reductions, money toward upgrades or closing costs and interest rate buy-downs” to consumers who use Pulte Mortgage to buy a home, according to the complaint in Maricopa County Court.
Sales reps tell customers “that Pulte Mortgage could offer the same loan terms or loan product as the consumers had pre-qualified for with the outside lender,” misleading some customers to believe that “they would obtain loans from Pulte Mortgage or a Pulte preferred lender that had terms comparable to those provided by other lenders,” Goddard says.
The promise of incentives paired with “comparable loan terms” led many customers to choose Pulte Mortgage over outside lenders, the state says. But on multiple occasions, “Pulte Mortgage offered consumers, who had already signed purchase agreements with Pulte Home, loan products that were substantially different from and costlier than those for which they had pre-qualified with outside lenders or what Pulte Home sales representatives discussed with them during Pulte’s oral ‘pre-qualification’ process,” according to the complaint.
Customers were often denied a refund of their earnest money deposits as long as “Pulte Mortgage or a Pulte preferred lender approved a consumer’s loan,” even if the customers could not afford the higher interest rate or monthly payment than they were promised, Goddard says.
The state cites one customer who was promised a 7 percent interest rate during pre-qualification, but was later offered a 13.875-percent interest rate by Pulte Mortgage, forcing her to forfeit her earnest deposit because she “could not afford the loan which was offered.”
Sales reps promised customers a refund of all but $500 of their earnest money if they provided Pulte Home with a loan disapproval notice before the loan application deadline had passed, Goddard says. The Pulte Home purchase agreements make the same promise.
But on multiple occasions, Pulte Mortgage did not give loan disapproval notices to customers before the deadline had expired, and refused to issue those customers a refund, according to the complaint.
In one instance, a Pulte sales rep asked a customer to “sign a cancellation agreement stating she had buyer’s remorse and forfeited her earnest money deposit” after the customer timely notified the representative that she had been denied a loan.
Goddard says that Pulte Home targets Spanish-speakers with advertisements and through a website, and makes Spanish-speaking sales reps available. It does not offer contracts in Spanish or provide translators, however, and its Spanish language website does not address the “risks” of its loans, unlike the English language website, which addresses both the “advantages” and the “risks.”
Goddard seeks restitution, an injunction and civil penalties for consumer fraud, against Pulte Home and Pulte Mortgage.