About the Author
Karen Deis is publisher of www.MortgageCurrentcy.com, the only e-zine that explains the mortgage rules and regulation changes in plain language so you can easily understand how they affect you and your loan files.
Wow, this is one humongous, sweeping piece of legislation—but if I were to rename it, I’d call it the “Mortgage Misrepresentation and Deceptive Practices Act”—because the 19 rules prohibit a lot of stuff that is still going on today!
This new rule is called The Mortgages Acts & Practices (MAP) and was finalized on July 21. It goes into effect on August 19, 2011. It’s part of Dodd-Frank’s Credit CARD Act and the FTC and Consumer Financial Protection Bureau will govern this rule.
Pay special attention to the “definitions”. I think the feds took out their thesauruses when it came to defining “commercial communications”. Yes, this law even applies to ad agencies, telemarketers, and list generators, realtors, builders, loan mod companies and even servicers…hey I can’t think of anyone it doesn’t include…if they offer mortgage products or terms.
To be perfectly clear, MAP is about the “solicitation for business”. And not face to face meeting with a client. That’s another issue all together if your GFE/TIL disclosures are inaccurate.
Oh, since it’s covered by the FTC and CFPB, BOTH entities can fine you if you misrepresent any (and I mean any) terms when offering a mortgage product. They even added a provision to allow States to bring civil action on their behalf.
This does not change anything on Reg Z rules (Mortgage Talking Points ™ – Advertising Rules(Reg Z) For Real Estate Agents and Builders).
Some of the biggies you’ll need to watch out for:
- This levels the playing field, even for servicers who hire telemarketers to solicit their own customers for refinances.
- It covers Loan Mod companies.
- Reverse Mortgage claims.
- Pre-approved or guaranteed financing communications without ever talking to the customer. Yep, those “You’re Pre-Approved” letters are going away. It covers claims of “guaranteed” refinancing.
- Oh, you cannot claim that you are affiliated with the federal government, that you are endorsed or sponsored by a government agency or use logos, symbols that even RESEMBLE a government agency. (I recently received a letter like this myself that looked like an official government envelope from the IRS.) Neither can you claim that you have “government (city, state or federal) grants” for home repairs.
- Or, if you call the company a “bank” and it really isn’t one that takes deposits and makes other types of loans.
- But one of the major provisions here is in the record keeping. Copies of ads, either in electronic or hard copy format must be kept for 24 months.
- Watch out about calling yourself a “counselor” or offering “expert advice” if you don’t have the credentials to back it up with. Like, if the ad mentions that you’ll show consumers how to save money on their income taxes—you should also be a tax preparer.
While MAP doesn’t say so in so many words, here are some other things it prohibits:
- Liar’s Page in the Newspaper/Online – claiming a low teaser rate, when the rate was never available, or that the payments will increase over the term of the loan.
- “No-Cash Needed” Ads – you better not ask for a credit report or an appraisal fee upfront or you’re in violation
- Oh, and you see this all the time, (including solicitations coming from servicers who offer to refinance) advertising “No closing costs” loans. There ARE closing costs, they are usually paid with an increase in the rate, but the consumer is PAYING closing costs, one way or the other.
- Reg Z covers this, but may ads fail to disclose balloon payments or pre-payment penalties. They must be clearly spelled out
- If quoting a payment, you must state if taxes and insurance are included. If not, you must state so. You cannot misrepresent the dollar amount taxes or insurance and should have back up documentation to back its accuracy. (This is especially true for new construction, where the home has not been assessed yet. Must give a reasonable quote based on what taxes WILL BE in the future.)
- Interest rate lock-in’s that are simply not available – you see this with builder advertising all the time, because it’s very rare these days to lock in the rate for 6 months while the home is being built.
- You cannot claim you are a “national lender” if you aren’t one! Even if you sell your loans to a national lender.
- Reverse mortgage are covered here, with their own set of prohibited practices.
- And one more thing, if you compare your rates to your competitors’ rates, Reg Z kicks in here and you must disclose the “terms” of “both’ Loans.
Whew, if you are audited, I’m sure that this is going to be “subjective” on part of the FTC, CFPB and your State’s rules.
And, if you are working with an ad agency, give them a copy of this too!
(You can access all the details when you test drive www.MortgageCurrentcy.com for 7 days for just $1)