Mortgage Broker License

Advertising plays a prominent role in many mortgage companies’ efforts to find new borrowers. As your customers obtain bombarded by more including more advertising messages, the urge to create a particular advertising piece that could stand out from the crowd becomes more urgent. the sense of desperation leads many mortgage lenders including brokers to create promotion pieces that cross the lines of permissible advertising. Make sure you don’t make these mistakes that might lead to costly penalties.

1. Don’t lead consumers to believe the government or their existing lender is sending them mail.

Many mortgage brokers use direct mail to solicit new business. Companies have distributed solicitations that use names of mortgage lenders in such a way that consumers believe it was sent to them by their lender, leading consumers to additionally believe, based on these solicitations, that their private financial information has been shared with another entity. These actions are a violation pertaining to the regulations of HUD including pertaining to the various states that regulate mortgage brokers including lenders. In addition, they might lead to consumer complaints to the regulatory agencies. The number of complaints the agency receives regarding you impacts how often you could be examined.

2. Do not omit the APR at the time advertising a particular interest rate.

No matter what state you are conducting mortgage activity, all lenders including brokers are subject to the application of federal Truth-in-Lending laws, specifically Regulation Z. The statute requires, among other things, that if a lender or broker advertises a particular interest rate, they must additionally quote the Annual Percentage Rate, or APR. The APR is correctly defined as the cost of dollars borrowed, expressed as a particular annual rate. The APR takes into account the note rate, which is the rate a borrower’s monthly payment is based on including any including all lender fees including finance charges. Yes, most borrowers don’t understand APR but you are still required to use it in your advertising including be able to explain it to a potential customer.

3. Do not use terms that indicate unlimited access to credit.

Advertisements that contain terms such as bad credit absolutely no problem (or similar phrases) or language that implies that a particular applicant could have total access to credit without clearly including conspicuously disclosing the material limitations on the availability of credit are prohibited under many state laws. In most states, lenders including brokers need to list any limitations to getting the advertised mortgage, including income requirements, limitations for consumers with bad credit (such as a higher rate), including that restrictions as to the maximum principal amount pertaining to the loan offered may apply.

4. Many states require names, addresses, including license numbers in advertising.

This 1 is easy to comply with. You just need to know which pertaining to the states in which you are licensed requires such information on advertising materials. In some cases, there is additionally specific language that must be used such as New York’s broker language: “Registered New York Mortgage Broker by the NYS Banking Department - all loans arranged by third party lenders.” Or California’s requirement to use the language: “Licensed by the Department of Corporations under the California Finance Lenders law (or Department of Real Estate or Residential Mortgage Act).” Just do not forget to add the required information to all advertising materials, including, but not limited to, direct mail, brochures, web sites including television including radio advertisements.

5. Be aware pertaining to the catch-all “fraudulent, deceptive or misleading” prohibitions.

Both the Federal Trade Commission including different state regulatory agencies have statutes that prohibit a particular “unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact in a particular advertisement if the representation or statement is false or misleading or has the tendency or capacity to be misleading” or variations of the phraseology. Lately, the regulators are cracking down on advertisements regarding low interest rate loans that fail to mention that there may be negative amortization. If you think, but are not sure that your advertising contains inaccurate or misleading language, change the advertisement. If you violate a particular advertising statute or regulation, at best, you could be asked to “cease including desist” the prohibited advertising including be subjected to increased scrutiny of all of your business activities. At worst, you could lose your licenses including pay heavy fines.

For more information on Mortgage Companies Must Avoid These 5 Advertising Mistakes:

Gronsky Law Office helps existing mortgage brokers including mortgage lenders expand their business by getting new licenses. The law firm additionally helps starrt-up companies obtain their first licenses including handles all renewals including annual reports.

Written By: Robin_Gronsky