Two federal rules govern most mortgage advertising, and they work differently. Regulation N (12 CFR Part 1014), the Mortgage Acts and Practices advertising rule, says nothing about what an ad has to contain: it makes any material misrepresentation about any term of a mortgage credit product, in any commercial communication, a violation, across nineteen named subjects. Regulation Z (12 CFR Part 1026) s. 1026.24 does the opposite and says what an ad must disclose once it states certain terms. One flyer can breach both.
Regulation N’s reach
Section 1014.2 defines the three terms that decide coverage. A commercial communication is any written or oral statement, illustration or depiction designed to effect a sale or create interest in buying, in any medium; the definition names labels, radio, television, billboards, telemarketing and on-hold scripts, training materials given to telemarketing firms, the internet and cellular networks, web pages and promotional items. A mortgage credit product is any credit secured by real property or a dwelling and offered to a consumer primarily for personal, family or household purposes. A term is any fee, cost, obligation or characteristic of the product, and any condition on its availability.
Section 1014.1 says the Consumer Financial Protection Bureau (CFPB) issued the part and that it applies to persons over which the Federal Trade Commission (FTC) has jurisdiction under the FTC Act. Section 1014.4 makes seeking a waiver of any protection the part gives a consumer a violation in itself, and s. 1014.6 lets a state attorney general sue under it.
The nineteen subjects in s. 1014.3
Section 1014.3 opens with the general ban, then lists paragraphs (a) through (s). The section’s lead-in says “including but not limited to”, and most of the paragraphs repeat it, so the examples inside them do not limit them. Grouped by subject:
- Price covers the interest charged and how unpaid interest is treated (a); the annual percentage rate, simple annual rate, periodic rate or any other rate (b); the existence, nature or amount of fees, including a claim that no fees are charged (c); and any add-on product such as credit insurance (d).
- Payment behavior covers taxes and insurance and whether they are escrowed (e); prepayment penalties (f); variability, including misuse of the word “fixed” (g); comparisons between a teaser rate or payment and any actual or hypothetical figure (h); the type of product, including a claim that it fully amortizes (i); the cash or credit available (j); minimum or required payments, including a claim that a reverse mortgage needs none (k); and when the borrower could default (l).
- Who is speaking, and what the product can do covers claims that it resolves the consumer’s debt trouble (m); affiliation with a government entity or program, including formats, symbols and logos that resemble one (n); the source of the communication, including a claim that it comes from the current lender or servicer (o); the right to stay in the dwelling and for how long (p); the likelihood of getting the product, including preapproval and guarantee claims (q); the likelihood of a refinance or modification (r); and counseling or expert advice, including the qualifications behind it (s).
Section 1014.5 holds the records for twenty-four months from the last date the communication was made or disseminated: every materially different commercial communication plus sales scripts, training and marketing materials; documents evidencing every mortgage credit product available while it ran; and the same for every add-on product. Failing to keep them is itself a violation.
The four triggering terms in s. 1026.24
Section 1026.24 starts from actually available terms: an advertisement stating specific credit terms may state only terms the creditor is or will be offering. Any rate of finance charge is stated as an “annual percentage rate”, using that term, and the ad says so if the rate may increase after consummation. For dwelling-secured credit no other rate appears, except a simple annual rate on an unpaid balance, no more conspicuously than the annual percentage rate.
The triggering terms in (d)(1) are the amount or percentage of any downpayment, the number of payments or period of repayment, the amount of any payment, and the amount of any finance charge. Stating any one makes the whole of (d)(2) apply, so the ad then states, as applicable, the amount or percentage of the downpayment; the terms of repayment over the full loan term, including any balloon payment; and the annual percentage rate, using that term, with the fact that it may increase after consummation if it may.
Radio and television advertisements get an alternative under (g): state all of the (d)(2) disclosures, or state the annual percentage rate and give a toll-free number for the rest. Paragraph (h) requires a tax deductibility warning where the ad says the credit may exceed the home’s fair market value.
Seven acts s. 1026.24(i) prohibits outright
Paragraph (i) applies to advertisements for credit secured by a dwelling.
- Using “fixed” for a rate, payment or the transaction in a variable-rate or increasing-payment advertisement, unless (i)(1) is satisfied, which for a variable-rate ad means putting “Adjustable-Rate Mortgage”, “Variable-Rate Mortgage” or “ARM” before the first “fixed” and at least as conspicuously.
- Comparing an actual or hypothetical payment or rate against a figure available for less than the full loan term, without the comparison (i)(2) requires.
- Calling it a “government loan program” or “government-supported loan”, or saying a government entity endorses or sponsors it, unless it is an FHA loan, a VA loan or a similar program that actually is.
- Using the consumer’s current lender’s name in an ad not sent by or for that lender, without the advertiser’s own name at equal prominence and a clear statement that it is not associated with that lender.
- Misleading claims that it will eliminate debt or waive obligations to another creditor.
- Using “counselor” for a for-profit mortgage broker or creditor, or anyone working for it in offering, originating or selling mortgages.
- Giving some trigger terms or disclosures only in a foreign language while giving others only in English in the same ad.
Telephone, email and text
Three rules outside the mortgage parts govern delivery. 16 CFR s. 310.4(b)(1)(iii)(B) of the Telemarketing Sales Rule makes it abusive to call a number on the FTC’s do-not-call registry, subject to the express written agreement and established business relationship exceptions in the same subparagraph. Section 310.4(c) confines calls to a residence to 8:00 a.m. through 9:00 p.m. local time where the called person is, absent prior consent.
The CAN-SPAM Rule is 16 CFR Part 316. Section 316.5 bars a sender from charging a fee, demanding anything beyond the recipient’s email address and opt-out preferences, or requiring more than a reply message or one web page visit, to opt out.
The Federal Communications Commission’s rules at 47 CFR s. 64.1200(a)(2) require prior express written consent before a call carrying an advertisement or constituting telemarketing reaches a wireless number, an emergency line or a patient room line by automatic telephone dialing system or artificial or prerecorded voice.
Mortgage assistance relief services
Regulation O (12 CFR Part 1015) covers mortgage assistance relief services. Section 1015.5(a) makes it a violation to request or receive any fee until the consumer has signed a written agreement with the loan holder or servicer incorporating the relief the provider obtained. Section 1015.9(a) keeps the provider’s records for twenty-four months from the date each record is created.
Where the unique identifier belongs
The content outline for the SAFE Mortgage Loan Originator Test, National Component with Uniform State Content names advertising in four places. Federal Mortgage-Related Laws lists Mortgage Acts and Practices, Advertising, 12 CFR Part 1014 (Regulation N) among the other federal laws and guidelines. Uniform State Content lists the requirement to include the Nationwide Multistate Licensing System (NMLS) unique identifier in advertisements, which is Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) implementing law at state level rather than a federal rule. Ethics names it twice: once with four sub-items, misleading information, due diligence review, unfair, deceptive or abusive acts, and federal regulation; and once as truth in marketing and advertising, permissible statements in advertising.
None of the federal parts above puts the unique identifier in an advertisement. Regulation Z s. 1026.36(g) puts the organization’s and the individual originator’s names and identification numbers on the credit application, the Loan Estimate and Closing Disclosure, the note and the security instrument. Regulation G s. 1007.105 makes a registered originator give it on request, before acting as an originator, and in the first written communication with a consumer.
Sources
- Regulation N, 12 CFR Part 1014; Regulation O, 12 CFR Part 1015; Regulation Z, 12 CFR Part 1026; Regulation G, 12 CFR Part 1007; 16 CFR Parts 310 and 316; and 47 CFR Part 64 Subpart L.