The Consumer Financial Protection Bureau (CFPB) said Monday it issued an order that permanently bans RMK Financial Corp., which did business as Majestic Home Loans, from the mortgage lending industry over repeat offenses against U.S. military families.
In a news release, the CFPB said it is prohibiting RMK from “engaging in any mortgage lending activities or receiving remuneration from mortgage lending.”
RMK Financial abruptly shut down earlier this month. The Ontario, Calif.-based wholesale mortgage lender “had to close their business due to a legacy issue,” according to a comment posted on LinkedIn on Feb. 2 by Christine Bahnsen-Smith, a former account executive.
According to the CFPB, in 2015 it issued an order against RMK for, among other things, sending advertisements to military families that led the recipients to believe it was affiliated with the U.S. government.
“Despite the 2015 order’s prohibition on these and other actions, the company engaged in a series of repeat offenses, including disseminating millions of mortgage advertisements to military families that deceptively used fake U.S. Department of Veterans Affairs (VA) seals, the Federal Housing Administration (FHA) logo, and other language or design elements to falsely imply that RMK was affiliated with the government,” the CFPB said in its release.
In addition to the ban, RMK is also ordered to pay a $1 million penalty that will be deposited into the CFPB’s victims relief fund, the agency said.
“Even after the 2015 law enforcement order, RMK continued to lie to military families by falsely implying government endorsement of its home loans,” said CFPB Director Rohit Chopra. “Our action reflects our commitment to weed out repeat offenders, and we are shutting down this outfit for good.”
RMK is a nonbank that is licensed as a mortgage broker or lender in at least 30 states and Puerto Rico, and it originates consumer mortgages, including mortgages guaranteed by the VA and mortgages insured by the FHA. It is not, however, affiliated with either government agency, the CFPB said.
In 2015, the CFPB said, it took action against RMK to end its use of deceptive mortgage advertising practices, including advertisements that led potential homebuyers to believe that the company was affiliated with the VA or FHA. RMK sent the deceptive advertisements to tens of thousands of military families, as well as to other holders of VA-guaranteed mortgages.
In addition to paying a fine, RMK was required to end its illegal and deceptive practices, the agency said.
The CFPB has previously warned about VA home loan scams. Many service members, veterans, and military spouses receive fraudulent calls and mailers from companies claiming to be affiliated with the government, the VA, or their home loan servicer, the agency said.
In the case of RMK, the CFPB found the company disseminated millions of mortgage advertisements to military families that made deceptive representations or contained inadequate or impermissible disclosures, in violation of the 2015 order, the Consumer Financial Protection Act, the Mortgage Acts and Practices Advertising Rule, and the Truth in Lending Act.
Specifically, the agency said, the company harmed military families and other consumers by sending millions of advertisements for mortgages that:
- Tricked military families about the government’s role in sending the advertisements or providing the loans: RMK sent advertisements that misrepresented that RMK was, or was affiliated with, the VA or the FHA, that the VA or FHA sent the notices, or that the advertised loans were provided by the VA or FHA. Military families or others who view such advertisements may decide to purchase the advertised mortgage based on the trust they have in the government agencies.
- Deceived borrowers about interest rates and key terms: RMK’s advertisements illegally disclosed a simple annual interest rate more conspicuously than the annual percentage rate, illegally advertised unavailable credit terms, and used the name of the homeowner’s current lender in a misleading way. Consumers who view such advertisements may be misled about the terms being offered or mistakenly believe their current lender is sending the advertisement.
- Misrepresented loan requirements and lied about projected savings from refinancing: RMK’s advertisements misrepresented that the benefits available to those who qualified for VA or FHA loans were time limited. Additionally, RMK’s advertisements misrepresented that military families could obtain VA cash-out refinancing loans without an appraisal and without incurring the cost of an appraisal, that an appraisal was not a condition of qualifying for VA cash-out refinancing loans, and that no minimum credit score and no income verification were required to qualify for VA cash-out refinancing loans. Finally, RMK’s advertisements misrepresented the amount of monthly payments, the annual savings under the advertised loans, and the cash available in connection with the advertised loans.
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating federal consumer financial protection laws, including the Truth in Lending Act, which is intended to ensure that consumers can compare credit terms more readily and knowledgeably.
Today’s order requires RMK to:
- Exit the mortgage lending business: RMK is permanently banned from engaging in any mortgage lending activities, including advertising, marketing, promoting, offering, providing, originating, administering, servicing, or selling mortgage loans, or otherwise participating in or receiving remuneration from mortgage lending, or assisting others in doing so.
- Pay a $1 million fine: RMK must pay a $1 million penalty to the CFPB, which will be deposited into the CFPB’s victims relief fund.
According to Mobility Market Intelligence, RMK had seen a nearly 70% drop in total loan origination volume year over year as Nov. 1, 2022, including a nearly 84% drop in refinance volume.
The company's closing was first reported by National Mortgage News, which cited unnamed sources stating that most of the RMK's staff was laid off via Skype in mid-January, and that the company closed Jan. 31. More than 60 employees were affected, the report said.
Monday's order is one in a series of actions the CFPB is taking to halt repeat offenders, particularly those that violate agency and court orders. The CFPB recently proposed a registry to detect repeat offenders in the financial marketplace. The action also complements broader efforts, including rulemaking by the Federal Trade Commission, to deter government and business impersonator scams.
