GMAC, one of the biggest losers in the subprime mortgage game is attempting to scare up business - literally.  Calculated Risk and Matt over at the OC Register point us to an article by Fortune Magazine senior writer Jon Birger who received a very ominous-worded piece of mail from GMAC about his mortgage:

Just consider the direct-mail solicitation I recently received from GMAC Mortgage. The letter was addressed to me as a "Washington Mutual Customer"- I have a 30-year, fixed-rate mortgage with WaMu - and it began ominously: "You've probably read about it in the newspaper or seen it on the nightly television news. Many mortgage lenders all across the country are heading for financial trouble because they have made too many questionable loans. Some lenders may even go out of business. And what will become of the people who trusted those lenders if that happens?"

Then came the kicker: "Allow us to help you refinance your mortgage with the rate and term that best suits your needs."

GMAC's pitch is absurd on so many levels I barely know where to begin. First off, the letter implies if you have a conforming mortgage, as I do, that you could somehow lose your mortgage should your lender go bankrupt. That's simply untrue. Sure, there could be some servicing glitches should your loan be acquired by another bank, but that's more an annoyance than a genuine financial safety issue.

Birger goes on to highlight just how deceptive and misleading this advertisement is on many different levels.  While it is great that this type of practice is highlighted in the press it is nothing earth-shattering.  I received dozens of pieces of mail from lenders and brokers on a weekly basis - and I review each one.  At least 75% of them violate some of the advertising and disclosure laws as required by the state of California.

Scare tactics are not unusual in these mailings with bright red warning labels about adjusting interest rates and untapped home equity.  Misquoted interest rates, non-extistent APR and licensing disclosure are also at the top of the frequent offender list.

Jon is right - lenders are desperate.  Consider the letter I received from IndyMac a while back that came in a UPS Overnight envelope asking for me to "come back" (I'm a former IndyCrack customer).  This has to be a game of continuous diminishing returns.  Spend more and more on more and more desperate advertising to get less and less of a return. 

As the business dries up more businesses will resort to high-pressure and scare tactics.  If GMAC is doing it you can imagine what the "wild west" mortgage brokers are out there doing.  My advice?  If you get an unsolicited letter in the mail with an offer that sounds too good to be true - use it to train your new puppy or save a tree and recycle it. 

With any large financial decision, pick up the phone and contact a professional you trust.