Feds Issue New Rules to Clean Up Mortgage Advertising

The Federal Trade Commission (FTC) is trying to clean up mortgage advertising. The agency is issuing new rules that ban deceptive advertising by the mortgage lenders regulated by the FTC.

In a typical case of inside-the-Beltway confusion, the FTC has the authority to regulate mortgage lenders, brokers, and servicers; real estate agents and brokers; advertising agencies; home builders; lead generators; and rate aggregators, among others.

It does not, however, regulate banks, thrifts or federal credit unions.

The FTC listed 19 examples of prohibited deceptive claims, including misrepresentations about:    

• the existence, nature, or amount of fees or costs to the consumer associated with the mortgage;

• the terms, amounts, payments, or other requirements relating to taxes or insurance associated with the mortgage;

• the variability of interest, payments, or other terms of the mortgage;

• the type of mortgage offered;

• the source of an advertisement or other commercial communication; and

• the consumer’s ability or likelihood of obtaining a refinancing or modification of a mortgage or any of its terms. 

Section 5 of the FTC Act generally prohibits advertisers from making false or misleading claims.  The Rule parallels this legal principle and will allow the FTC to seek appropriate relief against those who engage in deceptive mortgage advertising. 

The fledgling Consumer Financial Protection Bureau (CFPB) and state law enforcement authorities also may bring enforcement actions.

The five FTC commissioners voted unanimously to adopt the new regulations, with Commissioner Edith Ramirez, Chairman Jon Leibowitz, and Commissioner Julie Brill issuing a joint statement underscoring the importance of ensuring that “communications about mortgages to consumers whose native language is not English” are truthful and understandable.

Congress directed the FTC to initiate a rulemaking proceeding on mortgage loans in the Omnibus Appropriations Act of 2009, as clarified by the Credit Card Act of 2009.