Federal regulators announced a joint crackdown Monday on certain mortgage advertisements that four years after the housing debacle are still too good to be true.
The Consumer Financial Protection Bureau and Federal Trade Commission said 51 nonbank firms involved in mortgage lending or other areas of the housing market were under the microscope for alleged ads with potentially false information about interest rates, laid-back approval processes, purported government affiliation and other improbable claims.
The joint move, one of the CFPB's first enforcement-related actions against nonbanks, included letters to 32 firms - 12 issued by the CFPB and 20 by the FTC - warning them of possible violations of a 2011 rule barring misleading claims in mortgage ads.
The agencies’ review revealed several types of troubling claims that could be misleading to consumers. Examples are illustrated in these "mock ads". The agencies’ review found, for example:
• 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.
Both the FTC and CFPB have opened nonpublic law enforcement investigations of other advertisers that may have violated federal law. Approximately 800 mortgage ads from websites, Facebook, direct mail and newspapers were included in the review.
The CFPB is formally investigating an additional six firms for possible violations, while the FTC has launched 13 formal investigations. The agencies, which called their joint action a "sweep" of mortgage-related ads, said they looked at about 800 ads as part of the review. (They did not identify the companies being targeted.)
"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," Kent Markus, the CFPB's assistant director for enforcement, said in a conference call with reporters.
The FTC sent its warning letters to real estate agents, home builders and lead generators, urging them to review their advertisements for compliance with the Mortgage Acts and Practices Advertising Rule and the FTC Act.
The agencies seek to spur compliance with the Mortgage Acts and Practices Advertising Rule, known as Regulation N since rule making authority for it transferred from the FTC to the CFPB. The 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. Mortgage advertisers that violate the Rule may be required to pay civil penalties.