Today, along with the Federal Trade Commission (FTC), our Office of Enforcement sent letters to a number of lenders concerning potential violations of the Mortgage Acts and Practices – Advertising (MAP) Rule, a new rule that took effect in August 2011. The MAP Rule addresses claims and statements in mortgage advertising that may be misleading to consumers.
Many of these potentially misleading practices seem to be directed at older Americans and servicemembers/veterans. So today we are writing jointly to highlight things to be on the lookout for when you get mortgage advertisements. We have seen examples of the following potentially misleading practices through our complaint system, and also heard about them as we travel the country talking to consumers.
Be suspicious of ads with:
- Official-looking seals or logos that imply some kind of government status, for example making you think they come from the VA or HUD. Although government agencies do guarantee some loans, they are not involved in the actual lending or advertising of loans.
- Promises of amazingly low rates – which may turn out in the fine print only be in effect for a short period and then will readjust to a higher amount.
- 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.
You know the old saying: “If it sounds too good to be true, it probably is.” Some advertisers will use your military or veteran status as a way to approach you, promising special deals or implying VA approval. Others will use the lure of a “no-payment” reverse mortgage to troll for older Americans desperate to find a way to stay in their home when they can no longer afford a mortgage payment. And 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.
So please, be cautious. If you get an ad that sounds a little (or a lot) too good to be true, you should get more information from a trusted source before you respond to the offer. The FTC has published a consumer alert on deceptive mortgage ads and what to look for. We also have more information about mortgages and other financial products on our website at Ask CFPB, as well as specific information for veterans and older Americans. Take the time to know before you owe!