Why Haven’t Loan Officers Been Told These Facts? Alleged Monthly Payment Suppression Scheme

Lawsuit Seeks Relief for Bait-and-Switch Practices That Allegedly Hid the True Costs of Homes from First-Time Buyers

In a class action lawsuit brought forward by a group of consumer protection attorneys, D.R. Horton, the largest homebuilder in the nation, and its subsidiary, DHI Mortgage, are facing allegations regarding their advertising and loan manufacturing practices. The suit claims that they may have employed misleading tactics by presenting monthly payment figures for their homes that disclosed understated property taxes. Intentionally understated escrows and prepaids violate several federal consumer protection laws.

The lawsuit references statutory and regulatory exceptions related to TILA, RESPA, and FHA. It notably refrains from alleging any violations related to the MAP Act or the Consumer Financial Protection Act. However, the complaint does assert claims of unfair and deceptive practices, which may attract the interest of local law enforcement agencies. State Attorneys General are recognized as having the authority to initiate enforcement actions for violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Title X, about unfair, deceptive, or abusive acts and practices (UDAAP).

The lawsuit raises concerns that the builder and its mortgage provider may not have fully fulfilled their obligations regarding transparent consumer payment disclosures, potentially impacting consumers’ understanding of the affordability of their financing options.

Lawsuit Alleges “Payment Suppression,” Excerpts From the Class Action Complaint

“On behalf of those victimized by Defendants’ Monthly Payment Suppression Scheme, Plaintiffs bring this class action lawsuit. Plaintiffs seek redress for Class Members, who are all homebuyers who purchased their homes with FHA mortgages (referred to herein as “FHA Homebuyers” or “Homebuyers”), including but not limited to damages, disgorgement of profits from Defendants for this illegal scheme, and injunctive relief to ensure that Defendants comply with the law and cease preying on unsuspecting buyers seeking their part of the American dream.”

“Defendants execute this scheme through a deliberate bait-and-switch, designed to avoid detection until after purchase. Specifically, in calculating the estimated escrow amount in the initial payment disclosures, DHI Mortgage creates two separate escrow estimates. First, Defendants share a “Suppressed Estimate” with Homebuyers that uses the low property tax assessment for the unimproved land before D.R. Horton built the home. Defendants know that this Suppressed Estimate is not correct for the property after the home is built, but rather, dramatically, and falsely depressed. Second, Defendants create an internal “True Estimate” that reflects the substantially higher property taxes that will actually apply to the completed, improved property. While the “True Estimate” is contained in some misleading documents, Defendants do not use it to calculate the Homebuyer’s monthly payment. Instead, Defendants quote the Homebuyer an artificially suppressed monthly payment based on the Suppressed Estimate that is hundreds of dollars lower than what they will ultimately be required to pay each month.”

“Through this “Monthly Payment Suppression Scheme,” D.R. Horton and DHI Mortgage mislead homebuyers into believing their total monthly housing costs will fit within their monthly budget. But Defendants have actual knowledge of the true property tax amounts throughout the entire home sales and financing process, and they know what homebuyers’ monthly payments will actually be; however, they prominently and repeatedly center the suppressed monthly payment in all the paperwork provided to homebuyers.”

“Defendants are able to obscure their misleading property tax estimates from borrowers because of their integrated business model, which allows for the knowing cooperation of the home builder and seller, D.R. Horton, and its “preferred” mortgage lender, DHI Mortgage. By working together, Defendants have devised uniform marketing practices in which their sales agents focus homebuyers on artificially suppressed monthly payments, a tactic that flows through every step of the process, from the initial pitch to closing.”

From the National Consumer Law Center (Plaintiffs’ Attorney)

ORLANDO – Today, a group of homebuyers filed a class action lawsuit against D.R. Horton Inc., the nation’s largest homebuilding company, and its mortgage lending subsidiary, DHI Mortgage Co., to recover money they lost in deceptive home-selling and mortgage schemes that led to unexpectedly high monthly mortgage payments.

The homebuyers in the lawsuit, filed in U.S. District Court for the Middle District of Florida, are represented by Varnell & Warwick, P.A., Clarkson Law Firm, P.C., and the National Consumer Law Center (NCLC).

The lawsuit seeks to stop the defendants from luring homebuyers into buying more expensive homes with larger mortgages and get back all money the homeowners lost. Under the Racketeer Influenced and Corrupt Organizations Act (RICO), homeowners may be entitled to three times their out-of-pocket losses.

According to the lawsuit, D.R. Horton targeted prospective homeowners by promising low, affordable monthly payments. However, the company low-balled the true monthly costs because it excluded the majority of required property taxes.

“The lawsuit alleges that D.R. Horton and DHI Mortgage were running a ‘Monthly Payment Suppression Scheme’ to mislead first-time homebuyers into thinking their total monthly housing costs would fit their budgets,” said Jennifer Wagner, senior attorney at the National Consumer Law Center. “They preyed on people’s faith in the American Dream of homeownership to lure them into unaffordable, deceptive deals.”

Many buyers didn’t learn their payments would be hundreds of dollars higher each month until after they had closed on their homes and DHI Mortgage had sold the loans to a new mortgage servicer.

“The lawsuit claims that the home builder and its mortgage company were working together from their initial sales pitch to deceive buyers into closing on homes and mortgages by presenting artificially low monthly payments, leading to payment shock,” said Jeffrey Newsome, attorney at Varnell & Warwick.

In one instance, plaintiff Frankie Santiago was promised a monthly payment of $2,164.68 for a home in Lake County, Florida. Based on this, he chose a D.R. Horton home with a DHI Mortgage loan because the monthly payment was lower than comparable homes with similar sales prices. But less than a year after closing, Santiago’s new servicer conducted an escrow analysis that included all of the property taxes as well as the amounts he now had to cover for back taxes due to the scheme, and his monthly payment skyrocketed by nearly $1,000 to $3,136.33.

“Our goal in bringing this class action lawsuit is to recover damages for the many people around the country who’ve been cheated and to prevent future homeowners from being lured into this predatory scheme,” said Kristen Simplicio, partner at Clarkson Law Firm.

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Many stakeholders recognize that, in light of the Federal Government’s current stance on consumer protection, local law enforcement agencies and state collaborations are positioned to step forward and take meaningful action in this area. As a result, the industry should prepare for a heightened level of scrutiny and enforcement at the local level. We encourage you to attend the Loan Officer School 2025 National CE course, where you can gain insights into the two most prevalent consumer protection law violations and engage in thoughtful discussions on ethical considerations related to these matters.

Preparing the Loan Estimate

12 CFR 1026.19 Comment 19(e)(1)(i)-1

These disclosures must be provided in good faith. Except as otherwise provided in § 1026.19(e), a disclosure is in good faith if it is consistent with § 1026.17(c)(2)(i). Section 1026.17(c)(2)(i) provides that if any information necessary for an accurate disclosure is unknown to the creditor, the creditor shall make the disclosure based on the best information reasonably available to the creditor at the time the disclosure is provided to the consumer. The “reasonably available” standard requires that the creditor, acting in good faith, exercise due diligence in obtaining information.

12 CFR 1026.17 Comment 17(c)(2)(i)-1

Information is unknown if it is not reasonably available to the creditor at the time the disclosures are made. The “reasonably available” standard requires that the creditor, acting in good faith, exercise due diligence in obtaining information. For example, the creditor must at a minimum utilize generally accepted calculation tools, but need not invest in the most sophisticated computer program to make a particular type of calculation. The creditor normally may rely on the representations of other parties in obtaining information. For example, the creditor might look to the consumer for the time of consummation, to insurance companies for the cost of insurance, or to realtors for taxes and escrow fees. The creditor may utilize estimates in making disclosures even though the creditor knows that more precise information will be available by the point of consummation.

 

 

BEHIND THE SCENES: FBI Warns Quit Claim Deed Fraud is on the Rise

The idea that title theft is exaggerated really depends on who you talk to. Some “legal experts” note that this occurs relatively infrequently. But just like getting struck by lightning is rare, it’s still wise to avoid unnecessary risks. The facts seem to support that deed fraud is far more common than getting hit by lightning.

The National Association of REALTORS® conducted the 2025 Deed & Title Fraud Survey to measure the nationwide occurrence of these scams and collect feedback on policy solutions, with input from advocacy professionals in REALTOR® associations from 43 states and territories and Washington, D.C. Please note that sample sizes are small, so these figures should be regarded as guiding points.

Sixty-three percent of respondents reported awareness of such fraud in their markets within the past 12 months, with the Northeast experiencing the highest prevalence at 92%. These scams are more common in central cities and suburban areas, frequently involving vacant land rather than owner-occupied properties. Only 12% of cases involved owner-occupied homes, with the majority (52%) concerning residential land and fewer than 20% involving detached single-family houses. See the NAR survey link below.

And if the NAR wasn’t enough warning, look what the FBI has to say.

Property Owners and Real Estate Agents Urged to Take Action to Protect Themselves

The Boston Division of the Federal Bureau of Investigation (FBI) is warning property owners and real estate agents about a steady increase in reports of quit claim deed fraud it has received—scams that have resulted in devastating consequences for unsuspecting owners who had no idea their land was sold, or was in the process of being sold, right out from under them.

Known as quit claim deed fraud or home title theft, the schemes involve fraudsters who forge documents to record a phony transfer of property ownership. Criminals can then sell either the vacant land or home, take out a mortgage on it, or even rent it out to make a profit, forcing the real owners to head to court to reclaim their property.

Deed fraud often involves identity theft where criminals will use personal information gleaned from the internet or elsewhere to assume your identity or claim to represent you to steal your property.

“Folks across the region are having their roots literally pulled out from under them and are being left with no place to call home. They’re suffering deeply personal losses that have inflicted a significant financial and emotional toll, including shock, anger, and even embarrassment,” said Jodi Cohen, special agent in charge of the FBI Boston Division. “We are urging the public to heed this warning and to take proactive steps to avoid losing your property. Anyone who is a victim of this type of fraud should report it to us.”

Law enforcement and the FBI have been alerted to the fraud at all points in the process and have received reports involving a variety of fraudulent scenarios, including:

  • Scammers who comb through public records to find vacant parcels of land and properties that don’t have a mortgage or other lien and then impersonate the landowner, asking a real estate agent to list the property. Homeowners whose properties have been listed for sale don’t know it until they’re alerted, sometimes after the sales have gone through.
  • Family members, often the elderly, targeted by their own relatives and close associates who convince them to transfer the property into their name for their own financial gain.
  • Fraudsters known as “title pirates” who use fraudulent or forged deeds and other documents to convey title to a property. Often these scams go undetected until after the money has been wired to the scammer in the fraudulent sale and the sale has been recorded.

The FBI’s Internet Crime Complaint Center (IC3), which provides the public with a means of reporting internet-facilitated crimes, does not have specific statistics solely for quit claim deed fraud, but it does fall into the real estate crime category. Nationwide, from 2019 through 2023, 58,141 victims reported $1.3 billion in losses relating to real estate fraud. Here in the Boston Division—which includes all of Maine, Massachusetts, New Hampshire, and Rhode Island—during the same period, 2,301 victims reported losing more than $61.5 million.

  • 262 victims in Maine lost $6,253,008.
  • 1,576 victims in Massachusetts lost $46,269,818.
  • 239 victims in New Hampshire lost $4,144,467.
  • 224 victims in Rhode Island lost $4,852,220.

The reported losses are most likely much higher due to that fact that many don’t know where to report it, are embarrassed, or haven’t yet realized they have been scammed.

FBI Boston is working with property owners, realtors, county registers, title companies, and insurance companies to thwart the fraud schemes but it’s no easy task. The COVID-19 pandemic changed the way business was and continues to be conducted. More and more people have grown accustomed to conducting real estate transactions through email and over the phone. The remote nature of these sales is a benefit to bad actors.

Tips for Landowners:

  • Continually monitor online property records and set up title alerts with the county clerk’s office (if possible).
  • Set up online search alerts for your property.
  • Drive by the property or have a management company periodically check it.
  • Ask your neighbors to notify you if they see anything suspicious.
  • Beware of anyone using encrypted applications to conduct real estate transactions.
  • Take action if you stop receiving your water or property tax bills, or if utility bills on vacant properties suddenly increase.

Tips for Realtors:

  • Avoid remote closings, if possible.
  • Ask for in-person identity checks.
  • Request copies of documents that only the property owner would have. This includes a copy of the most recent tax bill, utility bill, or survey from when the property was purchased, in addition to the individual’s ID.
  • Send a certified letter to the address of record on the tax bill.
  • Look up the phone number by reverse search or through the phone carrier.
  • Call to verify the public notary and confirm he/she attested to the documents.

The FBI can work with our partners to try to stop wire transfers and recover the funds within the first 72 hours. We urge folks to report fraud and suspected fraud to the FBI’s Internet Crime Complaint Center at www.ic3.gov.

HUD OIG/DOJ Deed Fraud Enforcement Action

ST. LOUIS – A man accused of conspiring to steal or try to steal 16 homes and a duplex with bogus deeds appeared in U.S. District Court in St. Louis Thursday and pleaded not guilty to two separate indictments.

James L. Townes Jr., 50, of Berkeley, was originally charged by complaint on June 10, 2025. He was indicted by a grand jury on June 25 with one count of mail fraud, one count of access device fraud, one count of unlawful production of an authentication feature, four counts of identity theft and four counts of aggravated identity theft. An August 6 superseding indictment charged Townes with a total of 25 counts, including conspiracy, mail fraud, access device fraud, fraudulently effecting transactions, unlawful production of an authentication feature, identity theft and aggravated identity theft.

Townes was indicted in a separate case on August 6 with one count of mail fraud, five counts of wire fraud and four counts of theft of government funds.

The superseding indictment accuses Townes and Charnay Bartlett, 29, of using a series of deeds to fraudulently transfer the ownership of 16 residences and a duplex between September 2018, and April 2025. Townes and Bartlett stole the identities of the true owners and fraudulently notarized the documents and forged signatures to perpetuate the transfers, the indictment says. Townes continued to fraudulently transfer the properties after his notary license was suspended, the indictment says.

Bartlett faces one count of conspiracy, one count of fraudulently effecting transactions, four counts of unlawful production of an authentication feature and four counts of identity theft.

The second indictment accuses Townes of falsely claiming to be disabled from February 2017, through August 6, 2025. Townes, it says, claimed not to have a bank account or any resources and said he could not walk more than five or 10 steps, do any household chores or lift, squat, bend, climb stairs, concentrate or complete tasks. During that time, Townes ran Tied Tight Entertainment and acted as the registered agent of 13 other LLCs, owned two investment accounts, became commissioned as a notary public and filed property deeds, the indictment says.

Charges set forth in indictments are merely an accusation and do not constitute proof of guilt. Every defendant is presumed to be innocent unless and until proven guilty.

The U.S. Department of Housing and Urban Development Office of Inspector General, the Social Security Administration Office of Inspector General, the St. Louis County Police Department and the Hazelwood Police Department investigated the case. Assistant U.S. Attorney Tracy Berry is prosecuting the case.

NAR Deed and Title Fraud Survey

 

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