US: Credit Market

FTC Warns Some Mortgage Ads May Violate Law


The U.S. Federal Trade Commission said Tuesday that some advertisements for home mortgages might be deceptive and even violate the law.

The FTC said it had warned mortgage brokers and lenders, as well as media outlets carrying the advertisements, that the claims appearing on Web sites and in newspapers, magazines, direct mail, e-mail and faxes might be unlawful.

Warning letters were sent to more than 200 advertisers and media outlets, the FTC said in a statement.

"Many mortgage advertisers are making potentially deceptive claims about incredibly low rates and payments, without telling consumers the whole story," said Lydia Parnes, director of the FTC's Bureau of Consumer Protection.

For example, some ads touted rates as low as 1 percent without saying that they applied only during the loan's initial period.

The warnings stem from a nationwide review this summer of ads that failed to adequately disclose other important terms of home loans, the FTC said.

Questions of whether lenders inappropriately pushed home mortgages onto subprime borrowers -- those with poor credit histories -- are at the heart of the turmoil in that market.

Lawmakers and regulators are debating whether the federal government should oversee independent mortgage brokers and lenders.

The FTC said it had warned advertisers and media outlets that the ads might violate the Truth in Lending Act, a consumer protection law enforced by the agency and the Federal Reserve.

The law applies to consumer loans for $25,000 or less unless they involve real property or a dwelling. It also applies to credit cards and home equity lines of credit.

The FTC said the agency had brought 21 enforcement actions against companies in the mortgage lending industry over the past decade, focusing mainly on the subprime market.