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Agencies Target Companies for Tactics Used in Mortgage Ads

Two federal agencies partnered up to let certain companies know their mortgage advertising tactics may be unlawful.

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On Monday, the ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) and the ""Federal Trade Commission"":http://www.ftc.gov/ (FTC) announced letters were issued over ""potentially"" misleading advertisements that target veterans and older Americans. The CFPB sent about a dozen warning letters to mortgage lenders and brokers, and the FTC sent 20 letters to real estate agents, home builders, and lead generators.

The letters inform recipients that they may be violating federal law and urge review of the ads. The CFPB provided examples of warning letters to companies with mortgage ads targeting ""older Americans"":http://files.consumerfinance.gov/f/201211_cfpb_generic_warning_letter_older_Americans.pdf and ""veterans"":http://files.consumerfinance.gov/f/201211_cfpb_generic_warning_letter_veterans.pdf.

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The agencies randomly reviewed about 800 mortgage ads promoting different services from a variety of sources. For example, the ads targeted potential customers for loans, refinancings, and reverse mortgages, and the ads could be found anywhere including the web, newspapers, or on direct mail flyers.

Those targeted in the warnings are suspect of violating the Mortgage Acts and Practices Advertising Rule, or Regulation N, which prohibits misrepresentations in mortgage ads. Both agencies are granted authority to enforce the rule for non-bank mortgage advertisers.

Examples of potential violations the agencies found included ads suggesting affiliation with a government agency and ads offering very low fixed mortgage rates but with potentially misleading terms. The CFPB also says it found ads for reverse mortgages claiming no payments in connection with the product, even though reverse mortgages generally require monthly or other periodic tax or insurance payments, and may risk default if the payments aren't made.

""Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives,"" said CFPB Director Richard Cordray. ""Baiting consumers with false ads to buy into mortgage products would be illegal. We will conduct a fair and rigorous investigation into these issues and will take appropriate action for any violations we find.""

The CFPB says the companies it finds in violation of the rule could be subject to enforcement action. The FTC announced the possibility of paying civil penalties.

About Author: Esther Cho

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