CFPB And FTC Team Up On Misleading Mortgage Ads
By Consumers Union on Tuesday, November 20th, 2012
By Norma Garcia
On Monday, November 19, 2012, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) announced they sent letters to a number of lenders over potentially misleading advertisements related to mortgages. According to a Bloomberg News report , together, the agencies are investigating 19 mortgage-related companies.In addition the LA Times is reporting that,
“the regulators have sent letters to 32 other firms warning them about advertisements that falsely imply a connection to a government program or provide other potentially misleading information.”
Information about the identity of the companies receiving the letters is not publicly available, though Bloomberg reported that the rule that may be violated by the entities (Mortgage Acts and Practices Advertising Rule, effective August 2011) applies only to non-banks, hence the enforcement of the rule (which is jointly enforced by both agencies) would not involve traditional depositories. The CFPB says the potentially deceptive advertisements are targeting veterans and older Americans. The CFPB warns the public to be suspicious of ads with:
- Official-looking seals or logos that imply some kind of government status, for example making you think they come from the VA or HUD. Although government agencies do guarantee some loans, they are not involved in the actual lending or advertising of loans.
- Promises of amazingly low rates – which may turn out in the fine print only be in effect for a short period and then will readjust to a higher amount.
- Promises that a reverse mortgage will let you stay in your home payment-free. Typically borrowers with reverse mortgages still have to keep up with tax and insurance payments – and will most likely lose their homes if they don’t.
- Announcements of “pre-approval” and large amounts of cash or credit available to you. Typically there’s no guarantee that you will be approved for a loan, or the size of the loan, until you go through a standard qualification process.
In August 2012, Consumers Union (together with California Advocates for Nursing Home Reform (CANHR)) submitted comments to the CFPB about reverse mortgages and included our observations about potentially deceptive and misleading advertising involving reverse mortgage products.
Among other protections, Consumers Union and CANHR have called on regulators to outlaw deceptive marketing noting that all reverse mortgage advertising should be required to include a balance of information to help borrowers determine whether the loans are suitable for them. Consumers Union believes the same level of care and honesty in advertising should extend to all mortgage solicitations, whether for reverse mortgages or traditional purchase money or second mortgages. To learn more on how to protect yourself in the mortgage process take a look at the FTC’s advice for mortgage borrowers, “Money Matters”.