Mortgage Advertising. Is What I am Reading Accurate?

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) includes provisions that allow the Federal Trade Commission to further regulate mortgage advertising.

The rule contains both good and bad news for consumers. The bad news is that it might become more difficult to find information since lenders may become more hesitant to publish information without assurances that they are not in violation of the rule.

Once the dust settles, however, it’s likely that consumers will benefit from an added assurance that the information presented about mortgages is more accurate than it has been in the past. For example, the new rule requires that:

§ A loan that claims no fees are charged must truly charge no fees. Today, a so-called “no fees loan” actually has fees that are added back into the loan amount.

§ Loan characteristics such as pre-payment penalties must be made explicit.

§ Assumptions about how taxes and insurance are paid (escrow or not) must be made clear.

§ Rates must be clear for the full life of the loan—and loans which are variable cannot represent rates as being “fixed” even for part of the loan term.

One of the best parts of the rule is that it prohibits misleading solicitations made on the behalf of the consumer’s current mortgage lender. Have you ever received mail that appears to be from your lender (or another company you have worked with) but it turns out it really isn’t from them?

Since the deed to a home is filed as public record and the name of the lender is on that deed, many other companies use that information to send a variety of insurance, warranty, and other offers to new homeowners. They can still make the offers, but they can no longer make it appear as if the offer is coming from the lender.

The act will ultimately increase consumer confidence in print advertising when searching for a lender or mortgage. A good first step is to start with print advertising, however referrals from your Realtor or trusted friend are even better places to begin.