PHOENIX - The nation's largest home builder and its mortgage arm have agreed to alter practices that the state Attorney General's Office alleged are deceptive.

The agreement, in which Pulte Home Corp. and Pulte Mortgage LLC admit no fault, also involves the company's paying out nearly $1.2 million in penalties, expenses and reimbursement to home buyers.

Filed Monday in Maricopa County Superior Court, the agreement is subject to final approval by a judge.

At the heart of the issue is a process Pulte Home uses with customers who are shopping for a home but have not actually signed purchase agreements, said Assistant Attorney General Susan Segal.

In the legal complaint, Segal said the company encourages sales representatives to verbally "pre-qualify" buyers, getting financial and employment information from them. Some consumers received assurances that they had qualified for financing at certain interest rates or payments, she said.

It was only later that several home buyers learned they did not, in fact, qualify, Segal's complaint says. But by that time their opportunity to cancel the purchase had expired and the only way out of the deal was to forfeit the earnest money.

Segal said there were also instances in which consumers who already had financing in place were urged to instead take loans from Pulte's mortgage arm. In the end, they did not get terms that were as good as they originally had, but Pulte would not refund earnest money, she said.

The state cited one specific instance in which Pulte Home had "pre-qualified" a customer for a 7 percent interest mortgage. Based on that, the customer signed the paperwork for the home purchase, put down $5,000 and applied for a loan from Pulte Mortgage.

But the mortgage company came back, telling the buyer it could only give her a loan at 13.875 percent.

"The customer could not afford the loan which was offered and was forced to cancel the purchase agreement," Segal wrote, adding that Pulte refused to refund her earnest money.

In the agreement filed Monday, called a consent decree, Pulte officials agreed to change their policies to prevent sales representatives from implying they can pre-qualify anyone for a loan from any Pulte-affiliated mortgage company.

That doesn't preclude sales reps from inquiring about income. But the decree says the only thing they can use that for is to try to understand how much home a customer might be able to afford.

It also ensures that customers have three days after any response from the mortgage company that a loan has not been approved to get back earnest money.

In a prepared statement, John Chadwick, the southwest area president of Pulte Group, said the firm "respects the concerns of the Arizona attorney general and commends the office for its ongoing efforts to protect consumers throughout the home-buying process."

He said the company always has "operated in good faith" with its customers and the state.

The company also agreed to alter its Spanish-language marketing materials.

According to Segal, Pulte targets the Spanish-speaking community with advertising and a Spanish-language website and makes available Spanish-speaking sales representatives. But she said the company has no contract documents in Spanish.

She also noted that Pulte, in its English-language materials, describes the "advantages and risks" of various types of loans. But the Spanish versions describe only the advantages, with no mention of risks.

The company has agreed to revamp those materials.

On the financial side, the companies agreed to pay $500,000 into a fund run by the Attorney General's Office for consumer-protection, education and outreach programs. It also will reimburse the office $300,000 for its expenses.

The company also will:

• Refund $81,400 to 10 Arizona consumers who specifically complained to the Attorney General's Office about Pulte's refusing to refund their earnest money.

• Put $200,000 into an escrow account that will fund any new, legitimate claims for earnest-money refunds that are filed with the Arizona Attorney General's Office within 12 months of the settlement.

• Spend $100,000 to publish and disseminate Spanish-language educational materials.

Number to call

Consumers who believe they have wrongfully forfeited earnest money should contact the Attorney General's Office at 1-602-542-5763.