What Is This Clause?
A practice where the builder or its affiliated mortgage company presents artificially low monthly payment estimates that exclude or minimize property taxes, homeowner's insurance, HOA dues, and other recurring costs. Buyers close based on these misleading numbers and later discover their actual monthly payment is significantly higher.
How It Works
When you buy a new construction home, the builder or its affiliated lender typically provides an estimated monthly payment. This number is a key factor in whether buyers feel they can afford the home. Payment suppression occurs when these estimates exclude or understate costs that will be part of the buyer's actual monthly obligation.
Common exclusions include property taxes (which may be based on the land value rather than the completed home), homeowner's insurance, HOA dues, special assessments, and private mortgage insurance (PMI). The difference between the quoted payment and the actual payment can be 30-70% or more.
This practice is particularly concerning when the builder has an affiliated mortgage company, as the same entity benefits both from the home sale and the mortgage origination. Several builders have faced litigation alleging that payment suppression practices constitute fraud or violations of consumer protection statutes.
Why It Matters
Your actual monthly payment may be 30-70% higher than the estimate you received before closing.
Property tax estimates may be based on the undeveloped land value, not the completed home value — taxes can double or triple after reassessment.
Buyers who rely on suppressed payment estimates may find themselves unable to afford the home after the true costs become apparent.
Real-World Cases
Sohail et al. v. D.R. Horton, DHI Mortgage (RICO Lawsuit, 2024)
A federal RICO lawsuit was filed alleging that D.R. Horton and its mortgage subsidiary DHI Mortgage engaged in a systematic scheme to suppress monthly payment estimates, hiding true costs from buyers. The complaint alleges that buyers were shown payments excluding taxes, insurance, and HOA fees.
Which Builders Use This Clause
The following builders have been documented using this clause type in their purchase agreements.
State-by-State Enforceability
Payment suppression practices may violate federal and state consumer protection laws, including the Real Estate Settlement Procedures Act (RESPA), Truth in Lending Act (TILA), and state deceptive trade practices statutes. Several builders and their affiliated lenders are facing litigation over these practices.
What Buyers Can Do
- 1Demand a complete, itemized monthly payment estimate that includes principal, interest, property taxes (at full assessed value), insurance, HOA dues, and PMI.
- 2Get an independent estimate of property taxes based on the completed home's value, not the current land assessment.
- 3Compare the builder's payment estimate against a Good Faith Estimate or Loan Estimate from an independent lender.
- 4Ask for written confirmation of HOA dues, special assessments, and any planned increases.
- 5If the builder's payment estimate seems low, ask specifically what it excludes and request it in writing.