Ellen and Karl Holst didn’t have any reservations about doing business with Zebulon mortgage broker Jeffrey D. Cox when he contacted them in January 2013, offering to refinance the couple’s Wake Forest home at a lower interest rate than their bank could offer.
After all, the Holsts had known Cox, president and primary owner of Carolina Mortgage Group, for 20 years.
“We had rental properties and he mainly helped us with our with investment properties from time to time,” said Ellen Holst. “We never had an issue outside of from time to time it took him a while to close a loan.”
On Wednesday, however, a lawsuit filed by Attorney General Roy Cooper accused Cox of taking thousands of dollars in upfront fees from the Holsts and other clients, but failing to refinance loans on their homes and other properties as promised. The complaint, filed in the Wake County Superior Court, claims the unfair business practices dated back to at least 2012.
The state is seeking to ban Cox permanently from the mortgage loan business in North Carolina. It is also asking the court to order Cox to repay funds he allegedly swindled from clients and pay civil penalties.
Cox, who previously had offices in Zebulon and Wilson, also faces criminal charges of obtaining property by false pretenses and residential mortgage fraud.
“Homeowners trying to get a better interest rate shouldn’t get ripped off,” Cooper said in a statement released Thursday. “Taking money upfront and then failing to do the job is against the law, so we must take action.”
The N.C. Commissioner of Banks revoked Cox’s mortgage loan operator license and CMG’s mortgage broker license on Aug. 15, 2014, after that office received 15 complaints about the defendants between July, 2013 and April, 2014. That led to an order requiring him to pay of $90,345 in penalties and $36,345 in refunds to clients.
The Attorney General’s Consumer Protection Division also received five complaints against Cox and CMG including one from the Holsts, who became desperate for a speedier resolution after filing one of the complaints made to the Commissioner of Bank’s Office, in October, 2013.
A prime example
The lawsuit describes the Holsts’ experience as typical of the complaints the N.C. Department of Justice received regarding Cox.
Cox would “often tell the consumer that he could complete the refinancing quickly – usually promising the consumer the time period between completing paperwork and closing would be about 30 days,” the complaint states.
He asked clients for an origination fee of about 1 percent of the amount of their mortgage, and would then typically ask the clients to pay for appraisals of their properties, according to the lawsuit.
As time passed, Cox allegedly produced an array of excuses – from health issues to promises of even lower interest rates – to keep clients on the hook. Ultimately, the purported loans never closed and Cox did not honor refund requests by clients, according to the allegations.
The Holsts paid $3,780 as an origination fee and $465 as the appraisal fee on their home. Ellen Holst said Cox then convinced the couple into refinancing five rental properties. They wrote two more checks for a combined $6,240 in origination fees in late February and early March, 2013.
“We trusted him for sure,” Holst said of Cox. “Obviously you wouldn’t pay fees to someone upfront that you didn’t trust.”
Cox continued to make excuses as to why the Holsts’ loans had not closed through late September, 2013, the lawsuit states.
After the couple asked for a refund of the $10,485 they had paid, Cox assured he would pay them back but instead set up phony closing dates and eventually stopped communicating, the complaint charges.
“We started to distrust the excuses, but it ranged from ‘I’m working out of town’ to relative health issues to he had been sick,” Holst said. “We knew probably in the last few months before we filed the complaint that we were being lied to, but were trying to just finish the work.”
The Holsts missed out on a lower interest rate offered by their bank while being led on by Cox and CMG, according to the lawsuit. The rate they later ended up with from their bank was .75 percent higher than the rate the bank had offered them prior to being contacted by Cox.
Alongside the Holsts’ affidavit in the lawsuit was one from a Raleigh man who claims he paid $9,870 in origination and appraisal fees on four properties and never had any of the loans refinanced after waiting nearly a year.
Another from a Raleigh woman claims she tried to refinance her home through CMG and that Cox rescheduled her loan closing five times; after learning Cox was no longer a licensed loan broker, she took her business elsewhere.
“My advice to people would be, ‘Buyer beware,’ ” Holst said. “Be very careful who you deal with because there is no real protection.”