Tip Sheet. Keep in mind we are not a law firm and this is not legal advice. All advertising should be reviewed by an attorney prior to distribution.

Transcription

1 Mortgage Acts and Practices Act (MAP) Advertising Rule (Regulation N) Tip Sheet Keep in mind we are not a law firm and this is not legal advice. All advertising should be reviewed by an attorney prior to distribution. First and foremost is that all companies with a website, Facebook or other internet presence are advertising in a commercial space. The website in particular must be checked for compliance with the act. So, don t think you don t advertise. What Is MAP? MAP was issued pursuant to the 2009 Omnibus Appropriations Act as clarified by the Credit Card Accountability Responsibility and Disclosure Act of 2009 and applies only to non depository mortgage lenders, state chartered credit union, and entities that market and advertise mortgage products are not mortgage lenders such as mortgage brokers, real estate brokers, advertising agencies, lead generators and rate aggregators. The MAP Rule sets specific deceptive acts and practices in the advertising of mortgage loan products and prohibits misrepresentation in any commercial communication concerning terms of mortgage loan products. This includes internet, radio, billboards, print and television advertising. Who regulates this? The FTC was the original regulator and now the CFPB has authority to bring law enforcement actions and seek civil penalties against the entities subject to the rules. Federally regulated entities should not expect to be off the hook as their regulators are also watching all advertising. What are the specific rules? The company must have a written policy that insures compliance with the regulation. We recommend the policy cover the definitions and intent of the regulation as shown in these tips and include the procedures used to review the ad for compliance. The policy should also state that documents describing the products and services available at the time of the ad are maintained for at least 24 months. Advertising and marketing must be truthful and non misleading. Advertising is considered deceptive (FTC Deception Policy Statement of 1984) if: There is a representation, omission of information, or practice that is likely to mislead consumers acting 2012 Indecomm Mortgage U Page 1 of 8

2 reasonably under the circumstances; and (2) that representation, omission, or practices is material to consumers. o o o o The representation may be expressed or implied Reasonableness is evaluated based on the sophistication and understanding of consumers in the group to which the representation is targeted, which may be a general audience or a specific group such as the elderly. A disclaimer or qualifying statement may correct a misleading impression, but only if it is sufficiently clear and prominent to convey the qualifying information. The rule warns that many reasonable customers do not read an entire ad and fine print may not qualify as clarification if it is too small or brief. Information in the text does not automatically remedy a false headline. Sections of the act describe specific violations but the rules states these sections are not exhaustive of all possible violations. The sections in the rule bar misrepresentation of: Interest charged for the product The APR, simple annual rate, periodic rate or any other rate including a payment rate The existence, nature or amount of fees or costs associated with any mortgage credit product. Prohibits false or misleading claims that o fees are charged. This includes fees charged throughout the life of the loan. Terms associated with additional products or features that may be sold in conjunction with a mortgage product Taxes or insurance associated with a mortgage credit product The existence or amount of any penalty for making prepayments on the mortgage The variability of interest, payments or other terms of the product Comparisons between rates or payments including but not limited to comparisons involving savings The type of product being offered The amount of the obligation or the existence, nature or amount of cash or credit the consumer could receive from the loan 2012 Indecomm Mortgage U Page 2 of 8

3 The existence, number amount or timing of any minimum or required payments (ie: reverse mortgages0 The potential for default on the product including default for nonpayment of taxes or insurance The effectiveness of the product in helping consumers resolve problems in paying debts. This includes false or misleading claims the lender s or servicer s product (through waiver, forgiveness or otherwise) can reduce, eliminate or restructure a debt or any other obligation The association between a product or provider of the product and any other person or program, or entity The source of the mortgage product such as the communication is on behalf of the current servicer, when it is not The consumer s right to reside in the dwelling including false or misleading claims about how long or under what conditions a consumer can stay in the dwelling The consumer ability or likelihood to obtain any mortgage credit product or term or a refinancing or modification The availability, nature or substance of counseling services or any other expert advice offered to the consumer regarding the product including the qualification of those offering the services or advice. In other words, don t reference counseling services. The rule specifically states that a company is not required to provide a disclosure related to these advertising rules. However, TILA still requires the ARM disclosure and Consumer Handbook On ARMS provided AT application. Record retention includes keeping or being able to retrieve copies of all website information including footers and links available at all times. For example if a regulator asks for information about the advertising of an adjustable rate loan program, the complete information available at the time must be reproduced including the rates, terms, conditions, costs etc. that were shown on the website. TILA also has advertising rules that apply. This rule does not change TILA however TILA advertising rules were also expanded Indecomm Mortgage U Page 3 of 8

4 MAP and TILA Advertising Checklist: A checklist or form is recommend (by MU) to identify all information has been checked for items specified in the regulation that may be considered deceptive and define the target market. The form should be signed by an authorized individual and kept in an easy to find location. This checklist is designed to represent reasonable information a consumer can expect to read, hear or see in an advertisement for a mortgage provider or mortgage service provider. The information is divided into categories that should be assessed in every mortgage ad. Although every attempt has been made to include all portions of MAP, the company is responsible for identifying if the ad meets all MAP requirements. Product Clarity: Is the product available now through the company shown in the ad? Is the product available for a reasonable period of time? Is it a limited offer or does it have an expiration date? Retain documentation to prove the availability of the product as advertised. Is the product available to all geographic areas? If so, how was the advertising distributed to insure compliance with fair lending and equal credit opportunity laws? Is this loan fully amortizing? Is there a balloon payment? If so, the ad must state this. Is there a potential for negative amortization or an increase in the loan balance at any time during the term of the loan, under any circumstances? Is there a prepayment penalty? If so, are the terms and conditions clearly shown? Is the product readily available at the company shown in the ad and for a reasonable period of time after placement of the ad? Does the ad state if the offer will expire? Are there a limited number of loans that can be made under this product? Is the loan an FHA, VA or RD loan? Is the term insurance or guarantee used in the ad and clearly indicates the insurance or guarantee is for the lender and does not assist the customer? Is the product a reverse mortgage? If so, are the terms and conditions of a maturing event stated accurately in the ad? Are the payment options and occupancy requirements clearly referenced accurately Is private mortgage insurance required in any case? Is the purpose of the product accurately represented? The ad makes no statements about the effectiveness of the product or transaction to improve the customer s credit, resolve difficulties in paying debts, or result in a waiver or forgiveness in whole or in part of any existing obligation. Are any statements made about default? If so, the statement(s) must clearly define all terms and conditions related to default. Is the number of payments or period of repayment shown? If so, this is a trigger term under TILA and a loan terms example must be included Is more than one product advertised and is it clear which features and requirements apply to each product? 2012 Indecomm Mortgage U Page 4 of 8

5 The ad does not imply or reference any offering, authority, collaboration or approval by Fannie Mae, Freddie Mac, FHA, VA, RD, Ginnie Mae, HUD or any other government agency to offer the program. Transaction Clarity Is the type of transaction clear and accurately represents the corresponding underwriting requirements? For example is it clear whether the refinance will permit the consumer to receive cash out? Payment Clarity Is the payment fixed for the life of the loan or just a specific period of time? Is it clear when a payment change may occur? Is there potential for the payment to change at any point in the loan? If there are payment options, is it clear if any of the options may cause negative amortization? If there are payment options is it clear what happens to a shortage in the amount of interest due in any given month or over the life of the loan? Is it clear if the payment may have to be recast at any point in the future under certain conditions? Is it clear what recast means? Are any statements made about an escrow account? Is an escrow account required for collection of taxes and insurance (ie: FHA/VA/RD)? Is there a fee if the customer wants to have an escrow account? Is there a fee for an escrow waiver? Are additional insurance payments such as credit life or other additional costs included in the payment? If so, are the terms, conditions, costs and requirements associated with the insurance clearly disclosed to the consumer? Is the amount of any payment shown? If so, this is a trigger term under TILA and a loan terms example must be included. For first lien loans, disclose that the payment does not include the amount for taxes and insurance escrow holdbacks and that payment obligation will be higher (TILA) If the product is an ARM disclose the period of time each payment is in effect, use a reasonably current index and margin; specify the period of time during which each simple annual rate of interest will apply (TILA) 2012 Indecomm Mortgage U Page 5 of 8

6 Interest Rate Clarity Is the interest rate stated in the advertisement? If so, the APR must be shown and the simple interest rate cannot be more conspicuous than the annual percentage rate. If the interest rate can change, this fact must be stated. In addition, it must be stated that the APR may also increase. The amount of interest owed each month is stated as shown in the mortgage documents If the product offers a payment option that allows for a payment lower than the full amount of interest owed, the consumer is told whether the difference between the interest owed and the interest paid is added to the total amount due from the consumer The APR calculation is as clear The type of interest rate shown in the ad defines if the rate is simple annual rate, periodic rate or other rate If the ad references an interest rate that is temporarily low or is a teaser rate, it is clear whether the rate can increase substantially after a limited period of time The terms for locking an interest rate are clear The availability of a teaser rate is documented Closing Costs and Fee Clarity The ad does not imply there are no closing costs or no fees.(all loans have closing costs and fees) If the ad includes any statement about a finance charge, this is a trigger term under TILA. The add must therefore include a loan terms example. The ad does not imply another party will pay the closing costs Underwriting Clarity Is the amount of any down payment shown? If so, this is a trigger term under TILA and a loan terms example must be included. The ad does not imply that no down payment is needed or that 100% financing is available. This is an example of product and underwriting requirements not readily available The ad does not imply that all consumers can be approved or that bad credit is acceptable The ad does not imply pre approvals are available unless the company has a pre approval program (such as one defined by HMDA). The Equal Housing Opportunity logo is included in the ad The ad does not reference appraised values or the ability to appraise a home for a certain value Statements about credit quality, qualifying ratios, occupancy, or other underwriting criteria are supported by a program description. Corresponding pricing adjustments where applicable are accurately represented Combinations of underwriting risk factors are not reflected as being permitted in combination on one loan Indecomm Mortgage U Page 6 of 8

7 Clear Company Identity The name of the company conducting the advertising is clear Any address of the company provided is a physical location occupied by the company No other company name or reference or Identifying text such as a loan number is used in the ad Information belonging to another company such as a loan number, transaction identifies or other loan information is included in the ad Only the company logo and symbols are used in the ad The follow types of statements are prohibited in mortgage advertising: Any statement or promise about the effectiveness a product will have on the customer including the ability of the transaction to improve the borrower s financial position, resolving difficulties in paying off debt, the ability to reduce or eliminate debt Any statement about the likelihood of a refinance or modification in the future Any statement about the availability, nature or substance of counseling services or any other expert advice offered to the consumer regarding the product including the qualification of those offering the services or advice. Statements that make false assertions about the content or urgency of the ad Statement that inflate the focus of one aspect of the product and overshadow the product as a whole Logo s, signs, text or markings other than those specific to the company and where the company has all legal right to use the item such as copyright or trademark protection Statements referencing the advantages or disadvantages of renting versus owning Statements that may be perceived as threatening the consumer unless they take action Statements that include statistics about any factor associated with the loan process or homeownership or consumer sentiment including but not limited to economic conditions, foreclosure rates, delinquency rates, approval rates, performance measures etc., unless the statistic is documented by a verifiable and reputable source. (Reputable sources may include a federal agency, research institute, the Mortgage Bankers Association, reputable law firm or other source as may be deemed reliable.) Names, loan numbers, codes, ID#, transaction names or other information from other companies 2012 Indecomm Mortgage U Page 7 of 8

8 Additional Advertising Regulations: There are components in RESPA, Do Not Call, FCRA and the SAFE Act that apply to advertising. This tip sheet does not include all possible implications to all regulations for companies conducting very active advertising campaigns in the media or use trigger leads or other lead generation services. Consult and attorney! CONTACT INDECOMM MORTGAGE U FOR ALL OF YOUR EDUCATION, POLICIES AND PROCEDURES CUSTOMIZED WRITINGS YOUR STAFF WILL ACTUALLY USE EDUCATION FOR GROWTH SEAMLESS AND FLEXIBLE OUTSOURCING SOLUTIONS INDECOMM MORTGAGE U ALICE ALVEY, CMB Senior Vice President Gardenbrook Rd. Suite 100 Novi, MI U.COM 2012 Indecomm Mortgage U Page 8 of 8