On November 19, the FTC announced that after reviewing hundreds of mortgage advertisements, it sent letters to 20 companies, including real estate agents, home builders, and lead generators, warning them that their ads may be deceptive. The FTC also urged the companies to review their advertisements for compliance with the Mortgage Acts and Practices Advertising Rule, also known as Regulation N, and the FTC Act. The FTC did not reveal the identities of the companies receiving warning letters.
The FTC sent the letters in coordination with the Consumer Financial Protection Bureau (CFPB), which issued warning letters to approximately one dozen additional companies. The CFPB sent its warning letters to mortgage brokers and lenders. According to the FTC’s press release, both agencies have opened enforcement investigations of other advertisers that may have violated federal law.
The Mortgage Acts and Practices Advertising Rule prohibits material misrepresentations in advertising or any other commercial communication regarding consumer mortgages. The FTC and the CFPB share enforcement authority over non-bank mortgage advertisers, such as mortgage lenders, brokers, servicers, and advertising agencies.
After reviewing more than 800 mortgage-related ads, the FTC and CFPB found several recurring advertising practices they found to be troubling. These included:
- Advertisements offering a very low “fixed” mortgage rate, without discussing significant loan terms.
- Advertisements containing statements, images, symbols, and abbreviations suggesting that an advertiser is affiliated with a government agency.
- Advertisements “guaranteeing” approval and offering very low monthly payments, without discussing significant conditions on these offers.
In conjunction with of the announcement of the warning letters, the FTC also released a series of mock mortgage advertisements that illustrate the recurring practices the FTC and CFPB identified.
Click here to read the FTC’s press release announcing the warning letters.
Click here to view the FTC’s mock mortgage advertisements.