The state found problems with the company's pre-qualification practices, earnest money deposit policies and Spanish-marketing efforts.
According to court documents, some consumers believed they qualified for financing at a certain rate or monthly payment only to learn later that they didn't qualify for the amount discussed during a "pre-qualification" presentation with a Pulte Home sales representative.
In other cases, Pulte Home sales staff told consumers that Pulte Mortgage could offer the same loan terms or loan products consumers had pre-qualified for with an outside lender. As a result, consumers were led to believe that they would be able to obtain loans from Pulte Mortgage or a Pulte preferred lender, according to the state.
Consumers were also misled by the language in their sales contract, which many thought meant that they had to accept loans from Pulte Mortgage or a Pulte preferred lender instead of an outside lender. The state pointed out that in some cases, consumers ended up obtaining loans through Pulte that were "substantially different from and costlier than those for which they had pre-qualified with outside lenders" or what a Pulte sales rep had discussed with them. Consumers were then faced with either accepting an unfavorable mortgage or losing their earnest money deposit, which Pulte refused to refund, citing terms of a purchase agreement consumers signed.
The state also argued that Pulte made misleading statements in marketing to the Spanish-speaking community. The company has sales representatives who speak Spanish but doesn't offer contract documents in Spanish. Also, the company's marketing efforts in English differ significantly from its marketing efforts in Spanish, the state said. As an example, the company's English-language web sites make clear "advantages and risks" of its loans, whereas the Spanish-language web site only describes "advantages," not the risks.
"Certainly homeowners need to educate themselves about all of their options when buying a home," Arizona Attorney General Terry Goddard said in a statement. "But homebuilders and lenders have a legal obligation to provide their customers with complete and accurate information."
Under the consent agreement, Pulte must:
- Ensure that Pulte Home's Arizona sales representatives do not represent or imply that they're able to "pre-qualify" Arizona consumers for home loans.
- Disclose orally and in writing that communications between a prospective buyer and Pulte sales staff regarding how expensive a home the consumer can afford to buy do not constitute an offer of financing.
- Make sure marketing materials in Spanish and English are equivalent.
- Refund $81,400 to 10 Arizona consumers whom the attorney general alleged had wrongly forfeited their earnest money deposits after canceling their purchase agreements.
- Pay $200,000 into an escrow account to fund new claims for earnest money deposit refunds filed within 12 months of the settlement.
- Pay $500,000 to the Consumer Fraud Revolving Fund to fund consumer protection, education and outreach programs.
- Pay $100,000 to fund the publication and dissemination of Spanish-language educational materials.
- Pay $300,000 for the state's costs.
"We hold ourselves to the highest standards in customer services and have always operated in good faith with our customers and the Sate," Chadwick said in the statement. "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."