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Cease and Desist Order Issued Against Kentucky Mortgage Company

On Friday, the ""Kentucky Department of Financial Institutions"":http://www.kfi.ky.gov/ (DFI) issued a cease and desist order against a mortgage company in Louisville, Kentucky doing business as Home Ownership Possibilities for Everyone LLC (HOPE).


The order, which prohibits HOPE from engaging in the mortgage business in Kentucky, alleges that the company operated as a mortgage loan broker without proper licensure. In addition, it accuses HOPE of charging illegal upfront fees and making misrepresentations, concealing facts, or engaging in business that has ""tended to work as a fraud.""

""This is a case of a product that really was too good to be true,"" said Nicole Biddle, DFI nondepository division director. ""HOPE claimed to offer mortgage loans for purchasing or refinancing at less than 2 percent and with no closing costs. But for some loans that have closed in Kentucky, no funding was actually provided.""


According to DFI, HOPE has at least 230 loans in the process of origination, 52 of which involve Kentucky properties in 17 cities. The department said at least four of those loans have closed on Kentucky properties but were not funded, a practice known as a ""dry closing.""

Furthermore, DFI said HOPE charged an upfront, nonrefundable ""membership"" fee of $300 as part of the application process, as well as an additional 3 percent to 3.5 percent of the loan amount paid in advance to an escrow account. This, DFI explained, is in direct violation with the Kentucky Revised Statute Chapter 286.8, which states that application fees may not exceed $100 and upfront fees are illegal.

In addition to prohibiting HOPE from doing business in Kentucky, DFI's cease and desist order mandates that the company fund the four dry closings, put all Kentucky customer funds in an escrow account for restitution, and send DFI weekly notifications on all loans relating to Kentucky customers.

HOPE does have the right to request a hearing to appeal this order.

""Kentucky is leading the effort to protect consumers from companies engaged in unsound or illegal practices,"" said Charles Vice, DFI commissioner. ""This is an example of DFI's consumer protection branch utilizing its consumer complaint process to identify, investigate, and ultimately take legal action in order to protect Kentucky citizens.""

About Author: Brittany Dunn


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