Real Estate Blog - Real Estate Professionals, PLEASE, don't forget about the laws when writing about interest rates and payment!!!!! Straight talk before you get your hand slapped or worse!

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Real Estate Professionals, PLEASE, don't forget about the laws when writing about interest rates and payment!!!!! Straight talk before you get your hand slapped or worse!

Straight talk before you get your hand slapped or worse!

I have read a lot lately here on AR about the recent drop in interest rates. Good, bad or indifferent, that is not the purpose of this entry.

The purpose of my entry is to remind other mortgage professionals (and REALTORs who care to know or do include interest rates and/or payment in advertisements) that there are certain Federal Laws and State regulations that must be followed!!!!

Anyone heard of the Truth In Lending Act of 1968 aka: TILA?

I'm not a certified trainer and this is NOT an exhaustive list of the rules included within TILA, but you need to keep a few things in mind before your state regulator, HUD or banking commission comes knocking on your door (trust me, it's not pretty).

Following is a blurb from the most recent Idaho Department of Finance newsletter which shows what some of the penalties might be:

Don't get caught with your APR down! RIVERSIDE MORTGAGE, LLC (Rupert, Idaho) - June 5, 2008 -- Consent Order of Revocation of mortgage broker/lender license for various violations of the Idaho Residential Mortgage Practices Act and federal regulations applicable to mortgage brokering/lending. Violations included engaging in unlicensed mortgage brokering activity; failure to disclose yield spread premium; and obtaining documents signed by borrowers in which blanks were left to be filled in later.

ASSURITY FINANCIAL SERVICES, LLC (Englewood, Colorado) - May 1, 2008 -- Cease and Desist Order for advertising violations. To address the allegations included in the Cease and Desist Order, the Respondent entered into a Consent Order from which it paid $15,000 administrative penalty and $2,000 in investigative costs and attorney fees. Respondent must provide all proposed advertisements or solicitations for Department review for a period of 12 months.

21ST CENTURY FINANCIAL CORPORATION, INC. (Oakland, California) - March 4, 2008 -- Cease and Desist Order for advertising violations. Respondent paid $2,500 administrative and $1,000 investigative costs and attorney fees. Respondent must provide all proposed advertisements or solicitations for Department review for a period of 12 months.

To see the newsletter posted by the State of Idaho in full, CLICK HERE.

So, how can you avoid the fate of the aforementioned companies?

Like I stated before, I'm not a certified trainer. If you want to know the skinny on advertising laws, you can start with companies like TrainingPro.com or AmeriTrainEdu.com. But, maybe I can help for now.

1) - When you advertise (and your blog is an advertisement!!!) an interest rate, you must include the corresponding APR. And, please, don't just make this figure up!!!!

In the state of Washington (where we are also licensed) you MUST have copies of your advertisements on-hand and attached to EVERY piece of advertising in which you have detail rate/APR you must include:

1 - your lender RATE SHEET for that date detailing their fees;
2 - GFE and TIL showing the advertised rate, lender fees, broker fees, title fees, closing fees, etc.

One auditor even said they would ask to see HUD-1 Statements from closed loans during that same time period to make certain what you advertise is what you are ACTUALLY closing.

2) - When you advertise payment, you must include the following:

the assumed loan amount
interest rate/APR
down payment requirement, if any
credit score required
type of loan (30 year fixed, ARM, etc.)
whether the payment includes taxes and insurance
I don't think I'm forgetting anything...

So, please, before you advertise rate or payment, know what you are doing first. All this talk about 4.500% will do you NO GOOD if the state, HUD or banking commission comes in and shuts the door, or fines you so much you have to get a mortgage for yourself to pay for it.

Happy Originating!

Maryellen Garasky
Mortgage Broker
KMG Mortgage Group
(208) 664-3600
(509) 638-3455
www.kmgmortgagegroup.com

Posted by Kevin & Maryellen Garasky (KMG Mortgage Group - ID & WA) on 12/19/2008 05:41 AM

Comments (41)

Federal Laws Matter When Advertising in the ActiveRain Channel

straight talk for real estate professionals

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41 Comments on Real Estate Professionals, PLEASE, don't forget about the laws when writing about interest rates and payment!!!!! Straight talk before you get your hand slapped or worse!

DEC

Hopefully some of the lenders will get it together and be up front with the consumers. Thanks for the post

One person cannot be an expert in everything. That's why I have a team of individuals in related fields that I can call upon. I'm not a mortgage officer, an inspector, a lawyer, and not even an engineer anymore (retired after 35 years). All that's for others.

Mary Ellen, That is why when I have questions regarding a loan or some thing in the loan process, I call an experienced loan officer. Thank you for a tiemly reminder.

Kevin/MaryEllen -

I defer to mortgage professionals on resales - but this could be an important issue for Realtors as well with new construction or rehab condos - especially if an attractive interest rate is part of the sell.

Thanks for reminding us. I thought I was the only Realtor who heard of Regulation Z!

Happy Holidays!

DEAN & DEAN'S TEAM CHICAGO

Maryellen - Actually, I have heard about this as well. Going forward, I try not to advertise rate per se... but circumstance behind how you get the best one the Market Affords. That written, if you look hard enough... there's a lawsuit around every corner. While I appreciate the post, we've become too litigious for our own good. Then again, I'm more than happy to support throwing false advertising to the wolves...

MaryEllen: I think you busted me. Looking back over a lot of my posts lately I have ignored reg Z. I know better. Just got lazy.

Thanks for the reminder.

MaryEllen and Kevin - what an important post and it is why I rely on mortgage experts, but still not excuse for not knowing.

MaryEllen,

Thanks for a very good post that! I send my buyers to the bank, for one reason, I live in a rural area and folks just don't want everyone to know their business!

Thanks for the reminder---although I don't write in this area, it is valuable advice.

Great Post Kevin & Maryellen, thanks for the reminder!

Happy Hollidays!

Shawn

Reg Z came to mind when I read this. We agents and brokers really do not have to go into that much detail about the details of a loan/payment. We can run qualifying ratios but when it gets to rates, etc., that's a tad too specific for agents.

Lenders don't show homes and agents shouldn't try Truth In Lending computations. It wouldn't be accurate anyway unless the agent know the lender fees, etc.

K&M-

..Compliance seems to often be the first casualty of a down market.

Realtors are under so much pressure, and much more transparency has to come to the mortgage industry.

Steve

Obeoman

This a good reminder of the need for transparency and timely full disclosure by those qualified to provide the data.

Being fairly new to AR, as well as a fairly new Realtor, I have to thank people who inform us of important matters like this! I know better than to do this, but I may be writing a blog one day not really thinking, and accidentally forget to add in all the extras you have to have. So thank you for informing us of this, before its TOO late!

Very good and important post. TILA not only applies to mortgage brokers, but to real estate agents who insert interest rates into their advertising. Thanks for the reminder.

Like any other business you better know what you are doing and know the laws of your industry well.

Thanks, Maryellen. I appreciate the reminder!

Hi Maryellen,

I am not a mortgage broker nor do I advertise rates - but I think that this is a good refresher for those who do advertise rates and payments.

Rates are a very fluid situation and there needs to be clarity and comprehensiveness when talking about them.

I dont' really advetise rates but I do remember reg Z when the 0 interest rates were popular and first came out. We were not allowed to market that rate in any ad's as it was a violation of Reg Z. Good reminder!

Thanks for the great advice and timely post. Sometimes in our willingness to "help" we canoverstep our boundries. Thanks for the reminder.

This is a great post to help keep everyone in check. The penalties for not complying to these laws and regulations are simply not worth risking.

Great post, I think we forget the rule applies to blogs. With rates fluctuating so much day to day its hard to know exactly where they are anyway. Thanks for the reminder.

The APR is going to be based on the fees associated with that loan. This is much too much info for a blog post. I think we should stick to generalities like 'mortgages are at 40yr lows' or 'the lowest they have been in decades' and try not to quote specific rates because those are so dependent upon credit score.

I also have yet to find a person who can adequately explain to me how a credit score is computed, and if that is so, why the three agencies all have different numbers.

Great advise and super post, I thank you for sharing. Happy Holiday!

I think you should have shown more cases. Alot of people think that they can get away with violating TILA. There is a mortgage company and two major companies here in Chicago that are collaberating and don't think that they will get caught. Well, they have ..... they just don't know about it yet.

Thank you for this post.

Jean - Hopefully ALL the lenders out there will get it together, but I think that's expecting too much. Thanks for stopping by.

Richard - I can't agree more. A team of professionals is the best and easiest way to keep yourself out of trouble.

Barb - You're welcome!

Dean & Dean - Most especially if an attractive rate is part of the sell. Thanks for commenting.

Jason - I don't think there's anything wrong with advertising rates, it just needs to be done correctly. There was an interesting case in Washington state a few months ago about a gal who false advertised. Not only did she get her license revoked, she was fined up the wazoo and is now spending some time behind bars (in her case, it was GROSS false advertising). Yes, I agree, I was more than happy to see her gone! Thanks for stopping by.

Corie - Glad to be of help!

Janice - Can't agree with you more.

Mary- Coeur d'Alene is relatively small, too. I completely understand.

Diane - Thanks for stopping by.

Shawn - No problem. Thanks for stopping by.

Lenn - I can't agree with you more. That's why it's important to have a team of professionals you can count and rely on.

Steve- You are so right. Even though I'd be okay with more transparency. Weeds out the "less than" desirables.

Mark Watterson - ditto to Steve above.

Tony - Welcome to AR and thanks for stopping by!

Michael- It seems like everyone needs a brush up of TILA and Reg Z. What I have seen on AR as of late would me any state regulator grab their red pen!

Bill- Can't agree with you more.

Paul - No problem!

Mark MacKenzie - You are right. Rates are very fluid and clarity is necessary.

Missy- 0% rate??? Yeah right, and I have waterfront property in Arizona! Thanks for stopping by!!!!!

Lubbock Homes - Glad to help. Thanks for stopping by.

Karl - So true! Why risk it???

Lauren- I have heard that some bloggers count on that state, HUD and banking commission being so overwhelmed with print advertising that the bloggers do what they want with blogs and electronic advertising. I can tell you for certain that it doesn't apply in the state of Washington.

Christoper- TILA and Reg Z don't require that you detail all the fees in any advertising (print or otherwise), but that you just list the associated APR. I know in Washington state, however, they will call up and ask to see how you computed the APR and they will require you to provide them with a copy of the rate sheet for that day as well as a GFE and TIL supporting your APR.

Anthony - Thank you for stopping by!

Barb - I would have been happy (and more than able) to show more cases. Maybe another post?

Thanks to everyone for stopping by and Merry Christmas and Happy Holidays to you all!

Great post supporting the idea that realtors should stick to selling and mortgage brokers to lending.

MarcyMoyer

Intero Real Estate Menlo Park, Ca.

Great reminder! I'm positive we will see tons of new posts here about the interest rates, the posters will have no idea.

What's crazy is that retail lenders don't have to disclose yield spread premiums (YSP's)...just mortgage brokers. It seems like their trying to "stick it to the man" if you know what I mean! :)

Marcy - Maybe we should shout it from the roof tops?

Jim - Hopefully we've done our job to give folks a heads-up.

Jeff - I'm not sure where you got your information, but retail lenders do have to post APR - at least this was true for all my years working for direct lenders and banks. Are you confusing SRP (what a "retail" loan officer makes on a loan and DOES NOT have to disclose) and a YSP (what a mortgage broker makes on a loan and DOES have to disclose)???

Regardless, thanks for stopping by!

Maryellen

Maryellen -- THANK YOU for the reminder! I was going to send some information about the 37 year low to my "sphere" and after reading your post, I need o take a step back and review the materials and make sure I am following all the guidelines.

This is a good reminder -- it would seem there are a number of violators in this area on line. Happy holidays.

Kerry - Glad I could help. That's what this entry was all about. Thanks for stopping by.

Bob & Carolin - Let's hope this served as a reminder. I'm sure some of it is innocent enough and not intended to miss-lead, but the laws are in place for a reason.

Glad to see you got featured. I think this an important reminder ( well I hope it is a reminder and not the first time people are hearing this), especially on here since some folks would like to argue that blogging is not actually advertising.

Kevin & Maryellen... I would agree that this is a great reminder. I do some FHA vs conventional blogs out there... but I tell them that rates are examples of the comparison. I just wish they were tough in PA and NJ from 1992 to 2001. We had a mortgage section in the Philadelphia Inquirer and most companies in there would state rates that were bait and switch rates. But these companies did this for a decade. You can't tell me that the regulators or state agencies didn't see this.... it would make me mad. good post.

jeff belonger

DEC

Great post --- I was in the mortgage business in FL for years -- Unfortunate how the good ones are affected by the bad ones -- REG Z has always been there some just choose to forget about it -- JE

Michelle - Let's hope it's not the first time! I know the states of Idaho and Washington are starting to REALLY crack down on websites and blogs that they find. Especially Washington.

Jeff - I agree, far too many people got away with stuff for far too long. Luckily the state of Idaho is a real stickler. One examiner even told me that they have subscriptions to ALL newspapers in Idaho and check them every week. Now that's staying on top!!!

Jason - Yep, bad LOs make it difficult for everyone. Luckily there are fewer of them around now. ;)

Maryellen,

Great primer for any mortgage professional. Before anyone advertises payments or rates it is imperative to know his state's regulations about them. Or else it can get nasty.

DEC

Great post Maryellen! I have seen a lot of good and a lot of bad in the mortgage world and people deserve to be informed clearly of what is available and hopefully that information can help them make good sound decisions to better their lives.

Esko - Thanks, that was my goal. No reason to get in trouble is you can avoid it. Thanks for stopping by.

David - Thanks for stopping by and welcome to AR!

Maryellen

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