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March 28, 2024

Homebuilder Pulte agrees to pay $475,000 in settlement with Nevada AG

Pulte

Steve Marcus / File photo

Carpenters Procoro Espejo, left, and Moises Cuevas work on a single-family home for Pulte Homes in Henderson in this 2008 file photo.

Updated Tuesday, Jan. 11, 2011 | 1:50 p.m.

Homebuilding giant Pulte Home Corp. has agreed to pay $475,000 and improve its lending practices to settle an investigation of deceptive trade practices by the Nevada Attorney General's Office.

In papers filed Friday in Clark County District Court in Las Vegas, Pulte didn't admit wrongdoing but nevertheless agreed to the settlement to close a probe that was launched in 2009.

In describing the probe involving Pulte and homebuilder Lennar Corp. in March, the Nevada Attorney General's office said: "The investigation by our office results from the receipt of several complaints from Nevada residents against the companies raising serious allegations against Pulte and Lennar that they engaged in deceptive predatory lending practices against Nevada residents including falsifying and inflating income on loan applications; failure to disclose loan terms; changing agreed-upon terms at the last minute without the buyer’s knowledge or consent; high interest ARM loans for people who requested and qualified for lower interest fixed rate loans; hidden balloon payments; and requiring people with good credit and down payments to take out 80/20 second mortgages at high interest rates."

A Pulte spokeswoman on Tuesday noted Friday's settlement doesn't mention "predatory lending," which was referenced in March's statement from the Attorney General.

Rather, Friday's settlement says the state alleges Pulte violated one or more provisions of Nevada's Deceptive Trade Practices Act by failing to disclose material facts in connection with the marketing of loan products.

The probe, similar to one in Arizona, was launched after the Laborers' International Union representing construction workers charged that during the construction boom, certain home builders harmed some homebuyers with predatory and risky lending practices by inducing them into purchasing new homes at inflated values and with unaffordable mortgages.

Nevada's investigation of Miami-based Lennar remains open.

In 2010, Pulte and Lennar sued Nevada Attorney General Catherine Cortez Masto, denying wrongdoing in their lending practices and charging she had improperly hired a union-affiliated law firm to investigate the homebuilders.

Pulte settled that suit, but Lennar's suit remains open and records in that case show the Federal Trade Commission has also been investigating the lending practices at issue.

Pulte, a unit of PulteGroup Inc. of Bloomfield Hills, Mich., said in a statement Tuesday: "Pulte Home Corp. and Pulte Mortgage LLC have finalized an agreement with the State of Nevada that reaffirms their full commitment to providing clear and understandable disclosures to consumers regarding the home buying and financing process."

"The state has validated many of the company's existing procedures and calls for their continuation, while also strengthening the company's prequalification for financing disclosures. Additionally, Pulte has agreed to provide a monetary contribution to assist the State of Nevada in furthering its consumer protection, education and enforcement programs. Pulte entered into this agreement voluntarily. The state has affirmed that this agreement is not an admission of wrongdoing and does not constitute any evidence of violation of any law," Pulte's statement said.

According to the agreement, among other things:

-- Pulte Home salespeople will not represent or imply that they can or are able to prequalify any Nevada consumer for a home loan from Pulte Mortgage or a Pulte-affiliated lender. They can refer buyers to Pulte Mortgage or other lenders for home loan prequalification.

-- Pulte salespeople can inquire about a consumer's financial information only to determine the price a buyer can afford to pay.

-- Pulte will continue to disclose to consumers information about when earnest money deposits may or may not be refunded in the event of a financing deficiency.

-- Pulte will continue to disclose in writing that it offers incentives or discounts in exchange for consumers using affiliated businesses including Pulte Mortgage. Pulte must continue to disclose that there are other providers of such services and that their fees may vary.

-- Pulte will continue to ensure that its disclosures in marketing materials in Spanish are equivalent to those in English.

The settlement says that of the $475,000, $175,000 will cover the state's investigation costs and $300,000 may be used for consumer education and protection and for litigation to assist with the state's efforts to prevent or mitigate foreclosures and to fight mortgage and loan modification fraud.

Pulte settled a similar probe in Arizona for $1.18 million in August.

Pulte has done business in Las Vegas under the Pulte, Del Webb and Centex brands. Lennar has used the Lennar, Greystone and U.S. Home Corp. brands.

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