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Zillow Faces New York Attorney General and CFPB Lawsuit Over Alleged Mortgage Misrepresentations

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  Published in Business and Finance on Thursday, November 27th 2025 at 16:35 GMT by HousingWire

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Zillow’s Mortgage Lawsuit: What the New York Attorney General and CFPB Are Accusing the Real‑Estate Giant of

In a move that has sent ripples through the online‑mortgage market, Zillow, the home‑search engine that has been diversifying into lending for years, has found itself at the center of a lawsuit filed by the New York Attorney General’s Office and the Consumer Financial Protection Bureau (CFPB). The case, announced in late March 2023, claims that Zillow’s mortgage‑brokerage arm, known as Zillow Home Loans (formerly Zillow Mortgage), has engaged in a range of deceptive and unfair practices that mislead consumers about loan rates, fees, and terms. In this article we break down the key allegations, the context of Zillow’s growth into mortgage lending, and what the lawsuit could mean for the company and its customers.

The Core Allegations

The complaint, which was filed in the U.S. District Court for the Southern District of New York, alleges that Zillow Home Loans:

1. Misrepresented Mortgage Terms – Zillow promoted loan offers that appeared to be “pre‑approved” or “pre‑qualified” without actually performing a credit check or offering a legitimate approval. The plaintiffs say these offers were used to lure prospective borrowers into a “marketing funnel” that culminated in the company selling a loan with higher rates and hidden fees.

2. Hidden and Unclear Fees – The lawsuit accuses Zillow of failing to disclose key closing costs, points, and “originator’s fees” in a transparent manner. The complaint notes that many consumers were unaware of how much they would actually pay when they moved from the initial “offer” stage to the final loan commitment.

3. Deceptive Advertising – Zillow’s marketing materials, including banner ads and in‑app messaging, allegedly used language that was “misleading” and “over‑promising.” The CFPB and the New York Attorney General point to headlines that emphasized low rates while omitting the fact that those rates were contingent on a loan’s eventual approval and other conditions.

4. Violation of Federal and State Consumer‑Protection Laws – The lawsuit cites violations of the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), and New York’s “Fair‑Lending” statutes, arguing that Zillow’s practices undermine consumers’ right to fair and accurate information.

The complaint seeks more than $2 million in restitution and damages, along with a court order to modify Zillow’s marketing and disclosure practices.

The Broader Context: Zillow’s Mortgage Journey

Zillow entered the mortgage space in 2016 with a partnership with LoanDepot that allowed the company to offer “Zillow Home Loans” through a co‑branded platform. By 2020, Zillow had spun off its lending arm into a separate corporate entity, Zillow Home Loans, to allow for more focused regulatory oversight and brand differentiation.

Since then, Zillow has advertised itself as a “lender of choice” for first‑time home buyers and refinance customers, using its real‑estate data to target users who are actively searching for a home. The company’s marketing strategy has heavily relied on push notifications, in‑app “offers,” and targeted banner ads that promise low rates and “quick approvals.” This aggressive push into the mortgage business has attracted regulatory scrutiny, as the CFPB and state attorneys general have sought to ensure that online lenders maintain the same transparency standards as traditional banks and mortgage brokers.

Zillow’s Response

Zillow released a statement shortly after the lawsuit’s filing, asserting that its mortgage arm operates in compliance with all applicable laws. The company emphasized that all rates and terms are clearly disclosed in the loan commitment documents, and that no consumer is charged “hidden” fees. Zillow also noted that it has worked closely with regulators in the past and remains committed to protecting consumers.

In a more detailed response, Zillow Home Loans said it uses a “transparent, data‑driven approach” to match borrowers with the best loan products available on the market. The company claims that its “pre‑qualification” process is “not a guarantee” but a “probabilistic estimate” that helps consumers gauge potential rates. Zillow has also stated that it is “prepared to cooperate with the court to resolve any legitimate concerns” that arise from the lawsuit.

Potential Impact on Zillow and the Online‑Mortgage Market

If the lawsuit proceeds to judgment, the outcome could force Zillow to overhaul its entire mortgage‑marketing pipeline. In addition to the financial damages and restitution the court may award, Zillow could be required to:

• Re‑design its in‑app messaging and banner ads to remove any “misleading” language.
• Provide clearer disclosure of all fees and conditions associated with a loan offer.
• Implement stricter “pre‑qualification” processes that better communicate the uncertain nature of a loan approval.

Beyond the legal ramifications for Zillow, the lawsuit may set a precedent for how other online lenders are regulated. The CFPB has been increasingly active in addressing the “marketing” of mortgage products by non‑traditional lenders. This case may be used as a benchmark for how courts interpret “deceptive” practices in the digital space, particularly when “pre‑qualifications” or “soft‑credit checks” are used to entice consumers.

Looking Ahead

The lawsuit is still in its early stages. Both the CFPB and the New York Attorney General’s Office have indicated that they will pursue a “full” investigation into Zillow’s marketing and lending practices. Zillow, meanwhile, has indicated that it is prepared to defend itself in court and to cooperate with any regulatory oversight that arises.

For consumers, the key takeaway is to remain vigilant when navigating online mortgage offers. While Zillow’s platform may offer convenient access to loan products, it is crucial to read the fine print and ensure that any “pre‑qualified” rate is accompanied by a clear disclosure of all terms, fees, and conditions. As the case unfolds, regulators and courts may provide further guidance on what constitutes “transparent” mortgage marketing in the digital age.

In any event, the lawsuit underscores the evolving intersection of real‑estate technology and consumer protection, reminding both companies and borrowers that even the most innovative platforms must adhere to the same principles of honesty and transparency that have long governed the mortgage industry.