|Copyright 2011 First National Compliance Solutions Inc.
Compliance Solutions Inc.
Advertising Compliance By Jonathan Pinard & Bonnie Nachamie
From the National Mortgage Professional Magazine September 2011 Issue
The purpose of advertising any product or service is not to sell the product per se but to get
the consumer to take action. From the dawn of advertising deceptive or misleading advertising
generated the most amounts of interest and activity. Advertising claims became so
outrageous that congress formed the Federal Trade Commission (FTC) in 1914 with its
primary focus to stop unfair methods of competition in commerce.
The Federal Rules for Advertising Mortgage Loans state that if an ad contains any of the
triggering terms below it requires that the amount of the down payment, the terms of
repayment and the "annual percentage rate" be disclosed.
• The amount or percentage of a down payment
• The number of payments or period of repayment
• The amount of any payment
• The amount of any finance charge
If an interest rate is stated you must provide the APR in the same type size as the interest
rate. Essentially if you tell part of the story you need to tell the rest of the story.
Deceptive or Misleading Advertising
The FTC, HUD and many State Banking Departments are focusing on Deceptive or
Misleading Advertising and from the recent settlements you may be surprised by some of their
Here are some of the things mortgage companies have been cited for:
Using FINAL NOTICE OF RATE INCREASE and LOAN SERVICING DEPARTMENT instead of
their company name in the area normally used for a return address.
Saying “skip up to 2 mortgage payments” and “no out of pocket closing costs” in a mail
Displaying a misleading FHA seal in a manner that falsely represents that the mortgagee’s
business services or products originate from HUD.
Since Mortgagee Letter 2011-17 was issued on April 15th 2011 the use of the FHA Approved
Lending Institution logo must be accompanied by a conspicuous disclaimer that clearly informs
the public that the mortgagee authoring the advertisement is not acting on behalf of or at the
direction of HUD/FHA or the Federal government. Even using the acronyms such as Ginnie
Mae, FHA or HUD can lead to problems. In addition mortgagees are now responsible for
reviewing all advertisements generated by lead generators on behalf of their company for
compliance with advertising requirements and all business names, aliases, and d/b/a’s used
by FHA-approved mortgagees must be registered with HUD.
Doing it right
Don’t include an interest rate or other triggering terms without including the necessary
No advertisement may include language which deceives, defrauds or misrepresents loans
terms, conditions or charges, including but not limited to the use of words indicating
‘immediate approval’ or ‘immediate closing’.
Don’t make it appear that you are an exclusive provider of government loans or that your
company is acting on the governments behalf.
What should an advertisement contain?
In addition to the required disclosures all advertisements and solicitations should prominently
include the name and address of the originating entity, state licensing information and the
company’s NMLS Identifying number.
When using pictures of applicants make sure they are representative of the population as a
Use the Equal Housing Lender or Equal Housing Opportunity Logo
Add a disclaimer subject to credit approval
Advertising violations are costly. Protect your company by having a written advertising policy
detailing the required components of an advertisement and the procedures that are required
before an advertisement can be placed on behalf of the company. List an individual in
management that must approve any ad before it is placed. Some states prohibit Loan
Originators from advertising on their own and require that the company be listed on the