Pulte OKs settlement in Arizona loan probe

One of Arizona's largest homebuilders, Pulte Home Corp., has agreed to pay $1.18 million to settle a state investigation into how it marketed mortgages to homebuyers.

The state Attorney General's Office claimed the builder had misled potential buyers and sometimes inappropriately kept their deposits, among other practices. Part of the settlement will reimburse consumers who lost money.

The announcement marks the first time a state prosecutor has penalized a homebuilder over lending practices and could be part of a larger crackdown on the way mortgages were marketed and drawn up during 2004-07, metro Phoenix's housing boom.

The Arizona attorney general's yearlong investigation into Pulte began after the office received complaints from consumers who said they had been misled about buying homes or applying for mortgages during that time.

According to the complaint filed in Maricopa County Superior Court, the Attorney General's Office said Pulte salespeople led potential buyers to wrongly believe they qualified for certain mortgages with lower interest rates and monthly payments. The attorney general also alleged Pulte failed to refund some deposits after potential buyers found they couldn't qualify for mortgages they had been promised.

The complaints said the homebuilder provided different disclosure information in its Spanish marketing materials than its English materials.

Pulte is settling without admitting wrongdoing or liability. In addition to the monetary settlement, Pulte agreed to reforms in how it offers and promotes mortgages.

The agreement must now be approved in Maricopa County Superior Court.

"Certainly, homeowners need to educate themselves about all of their options when buying a home," Attorney General Terry Goddard said. "But homebuilders and lenders have a legal obligation to provide their customers with complete and accurate information. I commend Pulte's commitment to amend its practices and bring more transparency into buying and financing."

The settlement money will be allocated five ways:

• $500,000 to the attorney general's consumer-fraud fund, which pays for consumer-education programs.

• $200,000 to an escrow account that will reimburse homebuyers who lost deposits with Pulte through practices covered by the complaint. There were no figures available on how many people might be eligible for these funds.

• $81,000 to 10 Arizona consumers who already filed complaints over deposits they lost to Pulte.

• $100,000 for Spanish consumer-education materials.

• $300,000 to cover the attorney general's costs to investigate the complaints against Pulte.

"Pulte respects the concerns of the Arizona attorney general and commends the office for its ongoing efforts to protect consumers throughout the homebuying process," John Chadwick, president of Pulte's Southwest Group, said in an announcement from the state prosecutor about the settlement.

"We hold ourselves to the highest standards in customer services and have always operated in good faith with our customers and the state. We look forward to maintaining our role as an important contributor to Arizona's job and housing market, as we have for the past 50 years."

Pulte spokeswoman Jacque Petroulakis said complaints described in the settlement represent less than 1 percent of all the Arizona mortgages the company originated from 2004 to 2007.

In response to the Arizona investigation into its mortgage practices, Pulte earlier this year filed a lawsuit against Goddard. The builder said a law firm Goddard hired to help handle the case also did business with a labor union that had targeted Pulte.

Pulte's lawsuit will be dropped as part of this settlement, said Nancy Bonnell, Arizona assistant attorney general.

She said the Pulte settlement was part of an overall investigation into lending practices in Arizona, but she couldn't comment on whether any other builders are involved.

The settlement that will be filed in Superior Court states Pulte will:

• Ensure its Arizona sales representatives do not represent or imply that they are able to "pre-qualify" Arizona consumers for home loans.

• Disclose orally and in writing that communications between a prospective buyer and sales staff regarding how expensive a home the consumer can afford to buy do not constitute an offer of financing.

• Clearly disclose that Pulte offers buyers incentives, including free building upgrades or money toward closing costs, in exchange for their use of the homebuilder's mortgage division.

• Ensure that the representations made in its English-language and Spanish-language marketing materials are equivalent.

Arizona consumers who believe they have wrongly lost deposits to Pulte can file for a refund request with the state Attorney General's Office: .azag.gov or 602-542-5763.

by Catherine Reagor The Arizona Republic Aug. 10, 2010 12:00 AM



Pulte OKs settlement in Arizona loan probe