Federal regulators on Monday announced
investigations into possible violations of the law by mortgage
lenders and brokers suspected of false or deceptive advertising.
The Federal Trade Commission and the Consumer Financial
Protection Bureau said Monday that they had opened 19 investigations
after a joint "sweep" of more than 800 ads. They also issued 32
warning letters to lenders and brokers.
"Misrepresentations in advertising for mortgage products pose a
significant risk of harm to consumers because they can confuse and
mislead consumers when they are making one of the biggest financial
transactions of their lives," said Kent Markus, the consumer
bureau's assistant director of enforcement. "Those problems can be
particularly significant for veterans and older Americans."
Regulators reviewed mortgage ads in newspapers, direct mail and
on the Internet - including on Facebook - for violations of the
"2011 Mortgage Acts and Practices - Advertising Rule," which
prohibits unfair or misleading advertising for any mortgage credit
product, from costs and payments to interest rates and fees.
Advertisers that violate the rule could face fines.
"Mortgage advertisers are on notice that they have to comply with
the law," said Thomas Pahl, an assistant director in the FTC's
division of financial practices.
The agencies did not release the names of the companies that
received letters or that are under investigation.
Some of the ads boasted official-looking seals, logos or
abbreviations that made it look as if they were affiliated with the
Department of Veterans Affairs, the Federal Housing Administration
or the Department of Housing and Urban Development, regulators said.
Other ads offered "fixed" low rates without disclosing the true
terms of the loans, or contained mock checks that misled consumers
into thinking they had been preapproved to receive specific amounts
of money if they refinanced their homes or took out reverse
mortgages, regulators said.
Reverse mortgages allow homeowners who are 62 or older to receive
money from lenders by borrowing against the equity in their homes.
They are popular with older or retired homeowners because the
arrangement allows them to stay in their homes and receive monthly
payments or lump sums. The loans must be paid off if the homeowners
move, sell the homes or die.
Regulators said some ads for reverse mortgages wrongly implied
that homeowners wouldn't have to make any payments. Such loans
typically require homeowners to continue regular tax and insurance
payments, or risk default.
Consumer advocates welcomed regulators' actions Monday.
"It's good news that they are watching and looking into things
and hopefully stopping them before they become endemic, especially
because so often these kinds of predatory products are targeted at
military personnel and the elderly," said Kathleen Day, a
spokeswoman for the Center for Responsible Lending, a nonprofit
advocacy group based in Durham, N.C.
"Often they're on a fixed income or don't have a lot of
discretionary spending, and may be more vulnerable to a come-on that
promises an easy answer," Day said.
Misleading advertising has been a problem in the mortgage
industry for decades, said Don Frommeyer, the president of NAMB -
the Association of Mortgage Professionals, a trade association
headquartered in Plano, Texas.
"They need to clean it up, because there's too much confusion,"
Frommeyer said. "When all is said and done, it should get back to a
mortgage loan is a mortgage loan is a mortgage loan, and everybody
should be licensed and have to follow the same rules."
The investigations and warning letters will be "a good eye-
opener for the consumer," he said.
"If it sounds too good to be true, it usually is," he said. "You
just need people to start looking at these things with a grain of
salt."
