Three mortgage lenders are facing civil action for false and misleading advertising.  The three were identified in a joint Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) sweep of about 800 newspaper and internet ads and U.S. mail solicitations.  Most of the ads were randomly selected for review although some came to the agencies' attention from consumer complaints.

The three are all accused of misleading consumers with advertisements implying U.S. government approval of their products.  All Financial Services is being sued in the U.S. District Court for Maryland and administrative consent orders have been filed against Flagship Financial Group, and American Preferred Lending.

The most serious charges are levied against All Financial Services, a mortgage broker and lender operating in Maryland, New Jersey, Pennsylvania, and Washington, DC.  All Financial offers several kinds of mortgages but its alleged infractions center on its promotion of reverse mortgages.  CFPB says that from November 2011 to December 2012 the company misrepresented its advertising as coming from or affiliated with a government entity.  In one example CFPB said that company sent out 200,000 mailers carrying an eagle resembling the Great Seal of the United States and headlined "Government Lending Division" and "Housing and Recovery Act of 2008 Eligibility Notice." 

Consumers were also told that the FHA program was time-limited, that no monthly payments "whatsoever" would be required "as long as you and your spouse live in the home."  Both pieces of information were, at the time, untrue.

CFPB's complaint is seeking a civil fine and a permanent injunction to halt All Financial's alleged illegal activities.

In the consent order with Utah-based Flagship Financial Group CFPB states that from August 2011 to December 2012 the company sent mailings implying that its VA loans were endorsed or sponsored by the U.S. Department of Housing and Urban Development (HUD).  Over one million missives were mailed claiming the company was "HUD-Approved" and including text about federal legislation and that "HUD-Approved Flagship Financial Group has been directed to get VA homeowners instant relief by lowering their monthly payments."  

 The company also sent tens of thousands of mailers advertising mortgage credit products that looked like a government notice. For example, one mailing had a heading, "PURSUANT TO THE FEDERAL HOUSING ADMINISTRATION (FHA) HUD No. 12-045," and instructed consumers to call their "assigned FHA loan specialist," and obscured the company's name as the source of the advertisements.

With today's action, the company, which is licensed as a mortgage broker or lender in 35 states, will be prohibited from falsely implying a government affiliation in future advertisements. It will also pay a civil penalty of $225,000.

Similar charges were made in the consent order with American Preferred Lending, a mortgage lender and broker in California and loan originator in Florida.  CFPB says that from August 2011 to February 2013 the company sent out more than 100,000 mailings with an FHA-approved lending institution logo, obscuring the company as the source of the mail, and referring consumers to the website These factors combined gave the impression that the ads were from the U.S. government, or an entity affiliated with the government. Although the company is authorized to originate VA and FHA loans, it is not an agent of, or affiliated with, the U.S. government.

Under the consent order American Preferred will be prohibited from falsely implying a government affiliation in future ads and will pay a civil penalty of $85,000, an amount CFPB said reflected the financial condition of the lender. 

"Each of these companies has misled consumers with false advertising," said CFPB Director Richard Cordray. "The U.S. government is very serious about stopping companies from falsely claiming federal authority, and we are particularly concerned about false or deceptive statements made in advertisements about reverse mortgages that target older Americans."