Last week, the CFPB announced an enforcement action against RMK Financial Corporation d/b/a Majestic Home Loans (RMK) related to deceptive mortgage advertising practices. This enforcement action is the most recent in a series of enforcement actions and administrative proceedings concerning the 2011 Mortgage Acts and Practices Rule (Regulation N), 12 C.F.R. § 1014, governing misrepresentations in mortgage advertising.
Regulation N, effective as of December 30, 2011, generally forbids “any person to make any material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product.” The non-exhaustive list of potential terms that must be clearly identified include: (i) government affiliation (or lack thereof), (ii) interest rates, (iii) fees to be charged, (iv) payments associated with the loan, and (v) the amount of credit available to consumers.
On April 8, 2015, the CFPB and RMK entered into a consent order resolving the bureau’s enforcement action. According to the CFPB, RMK’s advertisements were misleading in a number of ways, including: (i) the advertisements gave the impression that the mortgage products were endorsed or sponsored by the Veteran’s Administration or the Federal Housing Administration; and (ii) the advertisements failed to clearly identify that the advertised rates were variable, and fine print was insufficient. RMK has agreed to pay a fine of $250,000. In addition, RMK is subject to heightened reporting and recordkeeping requirements for the next five years.
Lenders should be cognizant of these regulations as the CFPB appears to be placing a renewed emphasis on actively preventing deceptive mortgage advertising. In fact, the consent order with RMK is the third consent order related to Regulation N this year alone. According to the CFPB’s director:
Deceptive advertising has no place in the mortgage marketplace, and the Consumer Bureau will continue to take action against companies that mislead consumers with false claims of government affiliation. … Today’s action sends a clear message that misleading consumers is illegal, unacceptable, and will not be tolerated.