“Home Of The 1% Mortgage” Gets Notice: Bait And Switch Advertising Prohibited In Washington


OLYMPIA – December 17, 2007 – Linden Loans, LLC of Kirkland, a licensed mortgage broker, bills itself on television as the “Home of the 1% Mortgage.” In a Statement of Charges entered last Friday, the Department of Financial Institutions (DFI) alleged that Linden used bait and switch tactics in its advertising. A DFI investigation revealed that though Linden promised consumers residential mortgage loans at “1% interest, with no points and no fees,” not one borrower actually received those terms in 2006. DFI is investigating whether any borrowers in 2007 received the promised terms.

Deb Bortner, Director of the Department’s Division of Consumer Services, noted that in addition to bait and switch advertising, Linden allegedly violated the Mortgage Broker Practices Act by misrepresenting loan terms, omitting required disclosures, and engaging in an unfair and deceptive practice. “The 1% rate touted by Linden lasts only a matter of months, and requires borrowers to accept predatory loan terms that would greatly increase costs to borrowers,” Bortner said. “Consumers have to be careful. Low rate, low cost mortgage loans may be available, but they often result in borrowers paying more than they should,” she continued. “In this case, we allege that Linden’s offer was illusory—consumers who responded to the bait were switched to higher rate and higher cost mortgages. The borrowers who did get the 1% rate — only 44 of 333 borrowers — paid fees that in some cases grossly exceeded traditional broker fees.”

The residential mortgage loan advertised by Linden was a payment-option adjustable-rate mortgage (ARM) that allows borrowers to choose among several payment options. Depending on the payment option selected by the borrower, the loan may be a negatively amortizing loan, in that the payments do not cover the interest. Monthly payments can increase each year by up to 7.5% for five years, after which the interest rate is reset to amortize any unpaid interest. The cap on monthly payment increases does not apply to the reset, meaning that borrowers could be facing much higher monthly payments. Respondent Linden also imposes a three year prepayment penalty on borrowers who get the payment-option ARM.

The Statement of Charges names Linden Loans, LLC, doing business as Linden Home Loans, as well as its owners, Christopher Opdyke and Mark Sullivan. Mr. Opdyke is the Designated Broker, Compliance Officer, CEO, and a Loan Originator. Mr. Sullivan is the President and a Loan Originator.

The Statement of Charges gave notice the Department may issue an order requiring:

  • Respondents cease and desist deceptive advertising;
  • The mortgage broker license held by Respondent Linden Loans, LLC be suspended for 30 days;
  • The loan originator license held by Respondent Opdyke be suspended for 30 days;
  • The loan originator license held by Respondent Sullivan be suspended for 30 days;
  • Respondents jointly and severally pay a fine of at least $150,000; and
  • Respondents jointly and severally pay an investigation fee of at least $2,500.

“Borrowers who may have been subject to Linden’s deceptive advertising should contact the Department,” Bortner said. “We intend to closely monitor mortgage advertising in 2008, and expect similar enforcement actions will be forthcoming,” she continued.

All three respondents have the right to request a hearing on the charges.


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