FTC warns against deceptive mortgage ads

In the wake of ongoing troubles in the subprime-mortgage industry, the Federal Trade Commission in June undertook a nationwide review of mortgage ads, focusing on promises of exceptionally low interest rates or small monthly payments. (For details on the FTC’s findings, click here.)

Following that review, the FTC on September 11 issued a warning to mortgage brokers and lenders that their ads might be deceptive or in violation of the Truth in Lending Act. The FTC was also addressing the many Web sites, newspapers, magazines, direct mailers, and unsolicited e-mail and fax companies that run or send out the ads for the mortgages.

“Many mortgage advertisers are making potentially deceptive claims about incredibly low rates and payments, without telling consumers the whole story—for example that these low rates and payments apply for a short period only and can go up substantially after the loan’s introductory period,” said Lydia Parnes, director of the FTC’s Bureau of Consumer Protection, in a statement. “Home ownership is the American dream, but it can become a nightmare for consumers who don’t have the information they need to understand the terms of their mortgage.”

The FTC is advising advertisers to review their ads and is informing companies running them about their potentially deceptive nature and providing guidance on identifying questionable claims.

For more information on misleading mortgage promotions, read the FTC’s “Deceptive Mortgage Ads: What They Say; What They Leave Out.”—Steven H. Saltzman