The CFPB and Federal Trade Commission announced on Monday that it would be issuing warnings to mortgage lenders regarding their advertisements. Both say they are currently investigating many lenders that may have already violated the law. Specifically, they say these ads target veterans and the elderly.
Following a sweep that included close analysis of more than 800 mortgage ads, the agencies said some of the most flagrant misrepresentations included private loan programs claiming a government backing, misleading statements about interest rates and other costs associated with various mortgage fees. So far, the joint effort has resulted in at least twelve warnings being issued to lenders around the nation. Another twenty letters have been sent, as well.
Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives,
said CFPB Director Richard Cordray.
Baiting consumers with false ads to buy into mortgage products would be illegal. We will conduct a fair and rigorous investigation into these issues and will take appropriate action for any violations we find.
Delving in further to better understand those violations, regulators say they discovered some ads that had “official-looking seals or logos”, which would imply mortgage lenders have affiliations with the federal government. Other examples include misrepresentation about interest rates or reverse mortgages. Mock checks are also a growing concern. These are slips of paper printed to look like checks with a pre approved amount on those slips of paper, even though a true pre approval is not possible in mortgage loans. As anyone who’s ever bought a house knows, it’s a very long out process that requires a lot of paperwork, appraisals and contracts.
The agencies are acting under and new and relatively unheard of law, the Mortgage Acts and Practices – Advertising (MAP) Rule. Effective since August 2011, the MAP rules provides direction regarding claims and statements in mortgage advertising that may be misleading to consumers. What’s perhaps most disturbing is who these ads are targeted at.
Service members and veterans, along with older Americans, are the new preferred target by these unethical and illegal operations. The agencies also teamed together to provide a checklist of sorts for folks to be on the look out for. These, courtesy of the bi-agency effort, include:
Official-looking seals or logos that imply some kind of government status, for example making you think they come from the VA or HUD. (Government agencies do guarantee some loans, they are not involved in the actual lending or advertising of loans).
Promises of unrealistic low rates – rates can’t be promised until your credit is checked and other dynamics are in place and even then, unless there’s a contract, it’s difficult to guarantee any kind of interest rate. Remember, assume nothing.
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.
The co-effort also warns that some advertisements will use a veteran’s or military member’s status to reel them in with promises of special deals for their time spent with the military or implying instant VA approval. No payment promises for reverse mortgages are also being pushed heavily and are especially disconcerting since the elderly are sometimes targeted because of health issues.
Also, the agencies remind consumers the worst decisions are those made in desperation. It’s best to check into any lender before opting to do business. Although mortgage rates are very low right now, an offer promising “historically low rates” may still have hidden traps that turn it into a bad deal.
On both websites are more information for consumers. And, of course, one of the primary purposes of the CFPB is to collect and investigate consumer complaints. As its latest campaign states, “Take the time to know before you owe!” Those who have been victimized or have information are encouraged to contact CFPB. Currently, both agencies have representatives traveling the country with the goal of speaking directly with consumers. Consumers are also encouraged to visit the other mortgage tips, credit card tips and databases for information on how to submit complaints on many other financial products too.
And once you’re done on the ConsumerFinance.org site, share with our readers your experiences with filing complaints or finding the right information for better decision making efforts.