How the “Mortgage Acts & Practices Rules” Affect Real Estate Agents & Builders Part III: 19 Prohibited Practices

by 06 Jun 2012

(TheNicheReport) -- This is the last of the three-part article regarding the Mortgage Acts & Practices Rules.  The first article was an overview of the rules. The second article explained what “commercial communications” means and the record keeping involved. 

While the Feds list 19 prohibited practices, only 13 of them affect real estate agents and builders.

  1. Misrepresenting the dollar amount of interest charged
    • The amount of interest owed each month
    • The difference between the interest owed and interest paid
  2. Misrepresenting Annual Percentage Rate including
    • Simple interest
    • Periodic rates
    • Any other rates
  3. Misrepresenting Existence, nature or amount of fees
    • In addition to “no fees” charged
  4. Misrepresenting Products sold in conjunction with loan
    • Credit life or disability insurance
  5. Misrepresenting Taxes and insurance
    • How taxes & insurance are to be paid
    • Escrow account
    • Included or not included in monthly payment
  6. Misrepresenting Prepayment penalty
    • Existence, nature, amount and terms of penalty
  7. Misrepresenting Terms of variable rate mortgage credit
    • If using the term “fixed” for certain period of time
  8. Misrepresenting Rate Comparisons
    • Rate or payment available for less than term of loan
    • Comparing actual or hypothetical rate or payment
  9. Misrepresenting the Type of mortgage
  10. Misrepresenting Payments
    • When due
    • How many
    • “No Payments”  (Includes Reverse Mortgages)
  11. Misrepresenting associations or loan or provider
    • That provider is affiliated with federal government
    • Endorsed, sponsored by, affiliated with government agencies
    • Using government formats, symbols, logos that resemble government agencies.
  12. Misrepresenting that consumer has been pre-approved or guaranteed a mortgage product
  13. Misrepresenting counseling services/expert advice

So the bottom line is that the Federal Trade Commission and the Consumer Finance Protection Bureau are out to prohibit unfair and deceptive practices during the life cycle of buying a home and obtaining a mortgage – that means the initial advertising & marketing if loan terms are mentioned verbally or in writing; during the loan application, in the appraisal process and during the servicing of the loan.

Read more about it and pass this information on to your ad agencies.  You’ll find it in the Federal Register, FTC 16 CRF Part 321 (pages 43845 and 43846.

Karen DeisWritten and contributed by Karen Deis, President of Foundation Marketing, Inc., which specializes in training real estate agents and loan originators on consumer-direct marketing strategies. You may email Karen with comments or questions on this column at


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