The Ethics of Ambiguity has a new banner ad. I thought the couple dancing in the moonlight on the rooftop was bad. Then there was the much improved version: two male cowboys dancing together. I wonder if they released that banner just on the coastal states and avoided the Midwest; Brokeback Mortgage! Right around the holidays a hideous arm tattoo ad showed up. Look what they’re up to today:[photopress:Lowermybills1.jpg,thumb,alignright]
Is this ad predatory?  A $510,000 mortgage for as low as $1698 per month. That sure sounds like an interest only, pay-option, adjustable rate mortgage with the potential for negative am.  Fully amortized payments would probably be around $3,000 depending on the interest rate.  When you click through, the fine print explains it all. I’m comforted knowing they used Arial 9 point font instead of something much smaller.

Here’s Section 226.24 (which addresses advertising) of Regulation Z in our Federal Truth in Lending law, which is part of the Federal Consumer Protection Act.

In banner ads, why isn’t the annual percentage rate (APR) shown along side of the payment, along with a notice that the interest rate may (well, WILL) increase upon consummation of the loan?   At least some institutional banner ads show an *asterisk and offer the phrase “terms and conditions apply.

82 thoughts on “The Ethics of Ambiguity

  1. Jillayne,
    I agree. I’ve always found these ads very decieving. The fact of the matter is that’s job is to get leads as cheap as possible, not to represent the mortgage industry with credibility. If I’m correct, I believe they are forced to be a mortgage broker as well and therefore follow the same lending laws as everyone else. I wonder if that’s ever truly enforced diligently…especially in the fast moving online world. In the long run they will have to correct their advertising if there are problems with it. I’m sure the govt will come down hard if they knowingly advertise outside the lines of lending laws.

  2. Even though you know ads like these are false advertising, they are very enticing especially if you are trying to finance a $500,000 house like myself and would love a mortgage under $2,00/mo. What type of loan do you think would be best for my situation? Which company has had the ebst track record out there in Arizona?

  3. Justin,

    Jillayne emailed me and asked me for a response. This is from email I send to my own clients:

    Here are three lenders I think a lot of.
    The ultimate choice is yours, but any
    one of these folks can do a great job
    for you:

    Logan Hall
    SallieMae Home Loans
    W: 602-218-4315
    F: 602-218-4415
    C: 602-908-2188

    Brian J. Brady
    World Wide Credit Corporation
    858-503-2304- fax
    My Blog is at:
    My Website is at:

    Connie Moss
    Future Financial, Inc.
    W: 623-551-4734
    C: 623-570-3410
    F: 623-551-4345

    Brian Brady (a BloodhoundBlog weblogger) is in California, but he writes loans into Arizona. Brian and Connie Moss are both brokers, which means thay will have a broad array of products to work from. Logan Hall is a mortgage banker, which means he has fewer products but may also have lower fees. An apples-to-apples comparison of loans is difficult, so making sure you understand every detail will replay your effort.

  4. Justin,

    I recommend talking to three different types of mortgage lenders:

    Talk with a loan officer from your favorite bank
    Talk to a credit union
    Talk to a mortgage broker

    When you’re done, you will find yourself completely confused, especially if you receive three Good Faith Estimates that all look different because each lender might have completed the GFE on different loan TYPES.

    I recently ran across this company, although I honestly have not dealt with any of their loan officers personally, but I LIKE the premise of what they’re doing. It’s gutsy.

    Our Arizona readers need to help out here with a good referral for you, Justin. Each homebuyer’s mortgage lending needs are subjective, based on their own unique profile.

    Remember, with that ad, the mortgage payment would only stay under $2,000 until the ink is dry on the deed of trust. Then the payment increases. Read the fine print on the click-through.

  5. Awesome, Greg. Thanks for your fast response, leaving me time to go upstairs and watch Saturday Night Live.

    Incredible Agent from post #1: is a licensed mortgage broker in Washington State.

    From the WA State Mortgage Broker Practices Act
    Washington Administrative Code 208-660-440 Advertising:

    (3) When I am advertising interest rates, the act requires me to conspicuously disclose the annual percentage rate (APR) implied by the rate of interest. What does it mean to “conspicuously” disclose the APR? The type size of the APR must be the same size or larger than any other rates stated in the advertisement

    For something to be done, a consumer or one of us would need to file a complaint with a state regulator.

    Or one of us could just email their CEO and tell him or her to read this blog. Perhaps we’ll see a comment.

  6. If i buy a home today for 600K$, and put a down payment of 25%, and finance the rest…Can you folks explain to me what happens in case there is a real estate crash down turn and the property is now worth only 475K$? I still have 450K$ under loan today. Does this mean my down payment goes down the toilet? Or is it wiser to put a larger % down?

  7. Thanks for mentioning me, Greg and the heads up over on Active Rain, Ardell.

    I’ll start by offering a post I authored, “You’ll Never Get the Lowest Rate’:

    I think that can give you background to the deceptive advertising in my industry. may be a licensed mortgage broker but I always knew them as a lead aggregator. Their advertising does seem to attract the more desperate borrower who is referred to whomever will pay them the most money for that lead. has not, in my experience, originated mortgage product.

    Is their advertising deceptive? Not by the definition of the law but it is in spirit. They are preying on “payment buyers”. Are they doing it legally? Yes. Are they sending the wrong message? Absolutely. They are taking us back to the dark ages. Their tactics are akin to the sullied reputation of used car salesmen of yesteryear (used automobile purveyors are much more ethical today). We need transparency in pricing and personal consultation rather than a slick salesman on the end of a phone to deal with the challenges of residential property finance today.

    Now, they’ll argue that they are taking advantage of the power of the internet. They’ll also try the age-old explanation lenders have used in the past (we’ve funded $ X Billion, so we must be doing something right). That’s not true. They are perpetuating an image of deception in the industry. Hey, Hustler Magazine sells millions of copies each year under the blanket of the First Amendment but I wouldn’t be proud to stake my life reputation on a career with Hustler. is to the mortgage industry what Hustler is to journalism. They have reduced our service offering to “payment” and dragging down an industry that needs to be taking the high road today.

  8. Sandy:

    Downpayment and pricing are two different issues. An answer would be very long here. I’ll ask you to contact the author, Jillayne, for a referral to a lending professional to explain my comment.

  9. Sandy,

    If you buy a home for $600k and the price someone would pay for it drops to $475k then you keep making payments according to your mortgage agreement until you sell. Your equity goes down, but if you have a standard 30-year fixed mortgage your payments (including the interest and principal portions of the payments) will remain the same.

    You might be in trouble if you try to sell. If you put $150k down, then you will only get $25k back (which is probably going to be eaten up by the 6% agent fees if you go that route). If you put $75k down then you are going to owe the bank $50k after selling your house.

    On the other hand, maybe the house will appreciate another 10% and you can sell in a year to make $60k on your $150k.

    If you are planning to live there for 20 years and can afford the payments then do not worry about it. You have to live somewhere. Although with rents in the Seattle area running half of mortgages for equivalent places, I am waiting to buy. And if prices don’t drop in a few years then I will just get a new job somewhere less expensive.

  10. I get mailings like this all the time. “Your monthly payment can be $123.00!! That one really cracked me up!

    My question is, many look like they come from my oroiginal lender. Not WAMU where the loan was placed, but the original lender that changed at the closing table.

    Seems like they are trying to pretend they are my lender and not whoever they are… Why do they do that? Oh…so I will open it? Maybe that’s it, because that is why I do open it 🙂

  11. Rhonda,

    The reason I open it at all is because I know that at closing, everyone signs an agreement that if, after the fact, the lender needs to make a correction of some kind in name, etc the buyer agrees to comply. When I saw the first one, that’s what I thought it was.

    You will be happy to hear that once I realized it wasn’t, but was an “offer from my lender”, I picked up the phone and called “my lender”, the broker who placed the loan originally. I guess it depends on the relationship the consumer has with the broker at the onset, whether or not they would do as you suggest and as I did.

  12. I’m sure you probably get the calls from your clients too! I’ve had borrowers receiving letters telling them for a fee, they’ll get refunded their FHA upfront MIP (when there wasn’t upfront MIP), promising to resturcture their current loan from our company with a much lower rate, etc. And for reason, the clients who call me half believing these letters are the ones who are the most vulnerable…easy prey I guess. That’s why it puts a bee in my bonnett.

    I’ve had a cup of coffee. I’m better now. 🙂

  13. Good morning Ardell,

    When you recieve an advertisement disguised as an official government-looking document, the lender is in violation of this section of the WA State Mortgage Broker Practices Act. Here is the state administrative code:

    WAC 208-660-440 Advertising. (1) Am I responsible for
    ensuring that my advertising material is accurate, reliable, and
    in compliance with the act? Yes. Each mortgage broker is
    responsible for ensuring the accuracy and reliability of the
    advertising material.
    (2) A licensee is prohibited from advertising with
    envelopes or stationery that contain an official-looking emblem
    designed to resemble a government mailing or that suggest an
    affiliation that does not exist. What are some examples of
    emblems or government-like names, language, or nonexistent
    affiliations that will violate the state and federal advertising
    laws? Some examples include, but are not limited to:
    (a) An official-looking emblem such as an eagle, the Statue
    of Liberty, or a crest or seal that resembles one used by any
    state or federal government agency.
    (b) Envelopes designed to resemble official government
    mailings, such as IRS or U.S. Treasury envelopes, or other
    government mailers.
    (c) Warnings or notices citing government codes or form
    numbers not required by the U.S. Postmaster to be shown on the
    (d) The use of the term “official business,” or similar
    language implying official or government business, without also
    including the name of the sender.
    (e) Any suggestion or representation that the solicitor is
    affiliated with any agency, bank, or other entity that it does
    not actually represent.

    For anyone else who’s interested, here is the link:
    at the very top, there are two options, to look at the law and look at the rules. What I’ve copied and pasted is from the rules, page 65.

  14. Ardell,

    Here is the section of the WA State Mortgage Broker Practices Act that prohibits what you describe:

    (2) A licensee is prohibited from advertising with
    envelopes or stationery that contain an official-looking emblem
    designed to resemble a government mailing or that suggest an
    affiliation that does not exist. What are some examples of
    emblems or government-like names, language, or nonexistent
    affiliations that will violate the state and federal advertising
    laws? Some examples include, but are not limited to:
    (a) An official-looking emblem such as an eagle, the Statue
    of Liberty, or a crest or seal that resembles one used by any
    state or federal government agency.
    (b) Envelopes designed to resemble official government
    mailings, such as IRS or U.S. Treasury envelopes, or other
    government mailers.
    click on “final rules pdf” at the top of this page. It’s on page 65

  15. Good morning, Rhonda,

    Can you give Sandy a hand and recap what rates are predicted to do this year? I recall a news article this week where the person interviewed predicted a low-to-high range.

    Thank you, and thanks for jumping in and helping Sandy and Justin.

  16. I’m putting out an All Points Bulletin APB right here for any lender out there to jump on and comment (anonymously if you’d like) on why lenders purchase leads from (or any similar lead gen company) if doing so makes it harder for you to gather your own leads in a non-deceptive way.

  17. Hi Ardell,

    There is a section in the WA State Mtg Broker Practices Act that prohibits advertising disguised as an official-looking government document.

    go to dfi dot wa dot gov
    click on mortgage brokers
    at the very top, there is a click-through called “final rules pdf.” it is on page 65 of this document.

  18. Jillayne and Sandy,
    Mortgage interest rates are anticipated to remain stable this year.

    The Seattle Times printed an article on our local market, which I summarized recently at

    “Other predictions from the article are that mortgage interest rates should stay stable and, barring any wild-card impacts such as terrorist attacks, should remain below 7%. This is point seems to be supported by others the industry, including Barry Habib, of Mortgage Market Guide and who often makes appearances on CNBC. Barry predicts “for 2007, we actually see interest rates slightly lower, within a range of 5.75% and 6.75%, with a sweet spot between 6.00% and 6.375%.

  19. This blog seems to be very well written and very well engaged by others, but please do not lump all “Lead Generation” companies together. There are stories of fraudulant and predatory lenders – does that make all mortgage companies bad?

    I have been a part of the Lead Generation industry for many years, and there are many companies who are legitamate and work hard for consumers and their lending clients. There are also fraudulant companies, as there are in every industry, and then there are many companies just trying to grow and may not understand every aspect of each business they are involved in. This is not an excuse, but it is different to be trying to defraud people and just not doing a great job.

    Having said all that — there is a great deal of value working with Lead Generation companies, but like anything else in the world, investigate the company, investigate their practices and look at how they are advertising to consumers.

    If you want to look at a shady part of this business, look at the credit companies who are selling homeowners data (aka trigger data) without their knowledge or disclosure to lenders. That seems fradulant to me….



  20. Hi JB,

    Thanks for stopping by RCG! Yeah, I have totally agree with you on your first point: one predatory lender does not make all lenders predatory. One deceptive banner ad does not make all lead gen companies deceptive. Your suggestions are honorable: before jumping in bed with a lead gen company, investigate the company, and their advertising methods.

    Interestingly, the Federal Fair Credit Reporting Act allows credit reporting agencies to sell your credit history and mine to companies who would like to offer you and I credit, unless we decide to opt-out of pre-screened credit offers.

    Rhonda gives us all something to ponder in post #12. is owned by Experian, a credit reporting agency.

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  24. Dont forget how this may influence other online lead generation companies. If LMB is able to garner top positions and generate low cost leads using “sensational” claims what does that force their competitors to do?

    They must either do the same or get out of the game. Worse they up the anti. And nobody says a word while it is all happening, the lead gen company hides behind a long disclosure, the borrower ignores that they cant afford the home so they can impress their community with a fancy house, the broker takes his/her fees and leaves it all behind, and finally the lenders underwriter approves loans faster than Visa processes credit card payments. And this all creates a false economy in the U.S. A false sense of financial security. Glutiny.

    Until.. well, until it all hits the fan

    Consumers default, homes foreclose, Banks claim bankruptcy and ask for federal bailouts and at the end of the day politician blame each others party for the disaster.

    In reality it is the fault of millions of consumers not thinking, not making prudent choices, not going along with the false economy credit card companies and lenders are promoting. I dont like what LMB does, nor Ditech, Visa, MC or AMEX, but it can only be stopped if we the consumer stops and behaves rationally.

  25. Hi Discovery,

    Thanks for stopping by I like how you described the subprime meltdown in four quick paragraphs.

    Yes, there is enough blame shifting to go around to fill an ocean. In the end, I do not believe that the buck stops with the consumer. Why? Because the people who hold themselves out to be professionals in the mortgage industry know way more than an average, random consumer. There’s a power/knowledge imbalance. One way to improve on that is to address the legal relationship between the retail mortgage salesperson and the consumer. I have blogged about this extensively here:

    There never has been, nor will there ever be enough government resources available to police every single transaction or every single deceptive banner ad.

    Have you seen the new banner ads? They are VERY playful and clever.

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  28. Speaking of scams. We got suckered by Ameriquest. Our credit is ruined from high payment hikes. Is there any news you can give me, besides the laysuit, that can help me? Is there a gov. program specificly for Ameriquest borrowers? thanx

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