My phone rang early in the morning on Friday. Nobody calls me early in the morning unless they’re on the east coast. I glanced at the phone: Area code 202. Who do I know in Washington D.C.? Turns out it was Allen Huffman who works for Senator Dorgan. Apparently the senator is working on federal mortgage reform legislation, needs examples of deceptive mortgage advertising, and Allen found me here on RCG. This is what I sent Allen on Friday:
Here is a link to the story on Linden Home Loans. Inside this article there’s a link to the deceptive radio ad and television ad.
Here is a story about deceptive banner ads, from lead generation company Lowermybills.com
This website has pages filled with deceptive lmb.com banner ads for you.
The payment advertised on the banner ad in this example, once you clicked all the way through, was for a pay-option, interest only, negative amortization ARM loan. For a fully amortized 30 year fixed loan, the payment would be around $3,000. The web viewer would not see all the fine print unless they had already applied for the loan and scrolled all the way down to the bottom of the fourth or fifth screen. Very deceptive. I believe LMB is still running ads. Now the banners are advertising a drop in the “federal funds rate.”
Many, many banks, consumer finance companies, and mortgage brokers purchase leads from lowermybills.com. Lowermybills.com doesn’t make loans. Instead the company sells consumer information over and over again.
I have always considered that it was not in the industry’s best interest to purchase leads based on deceptive advertising. All this does is circumvent an honest company’s own attempts to advertise in a fair manner, the way the federal truth in lending laws were designed. If I were to come up with any new ideas for industry reform, I would want the industry to be held accountable for the advertising used to gather the leads purchased.
So for example, take a look at the mortgage spam in your spam bin. Have you ever clicked on those links? They will take you to a website that appears to be for a mortgage lender. But in reality this is a lead generation website. A homeowner’s private financial data is then sold to multiple loan originators who contact the homebuyer or refinancing homeowner over and over again. If the homeowner does not respond, then the lead is sold again and again. I am asking the question: Shouldn’t mortgage banks and brokers be held accountable if the LEADS they purchased were gathered using deceptive advertising? Lead generation companies should be held to the same standards within the federal Truth-in-Lending Act that banks and brokers must abide by.
Here is a very good example of a deceptive website. This person, Jennifer Hershey doesn’t exist. There is no place on this website to contact the owner of the site, we have no idea if this person is licensed to originate mortgage loans in any state, and there’s no company licensing information on here at all. Instead, this appears to be a “front” for a lead generation website.
I also have a growing collection of junk mortgage faxes advertising note rates from 1% all the way up to 5% for a “fixed” mortgage, showing monthly payment information that looks like an obvious pay option, negative AM, interest only ARM. No APR, no company information, no phone number for how to contact the company. The only phone number on the fax is a 1800 number answered by a telemarking person taking loan applications. This person is not a licensed loan originator How do I know? I asked her. She said she works for 20 different mortgage brokers.
People, now it’s your chance. Allen at Senator Dorgan’s office says to email or fax your deceptive mortgage spam, letters, websites, banner ads, and if you have links to deceptive radio and TV ads, he’ll take those, too. Today I received his permission to publish his contact info.
SEND DECEPTIVE MORTGAGE ADVERTISING HERE:
allen_huffman@dorgan.senate.gov
Fax: 202-224-1193
Jillayne, blogging certainly makes the world a smaller place! 🙂
I’ve covered this quite a bit too on my blog–more so the junk mail. It’s digusting that some lenders will resort to trickery to gain clients. DFI wants to know too, so I recommend photo copying what ever is sent to Dorgan to DFI if you’re a WA state home owner receiving mortgage junk mail.
Enforcement Unit, Division of Consumer Service
DFI, P.O. Box 41200, Olympia, WA 98504
Some of this stuff is so misleading that I’ll have clients call me and ask if I sent it to them because the mail-piece will have our company name, mortgage amount, etc.
I take it that these mortgage advertisements are using a bait-and-switch technique since most of the exotic products that would have allowed these low payments are no longer available.
This raises a question that has been vexing me for months: is the current lending environment tougher than it was in 2000? Does anyone have an idea if it has now become tougher for most people to get mortgages than it was at the turn of the century? I keep hearing how lending has gotten tougher but I just don’t know how that relates to historical norms since things had gotten SO out of whack in recent years.
Just received this afternoon on my home fax:
Just in:
All time new low rate
5.875%
30 yr fixed
act now!
with rates as low as:
1.75%
Jumbo loan specialists
95% financing
no documents needed
fast and easy
self employed ok
bankruptcy ok
good or bruised credit ok
free appraisal
10 day closings
Are these terms available anywhere?
Sniglet,
I would say this is tougher than 2000. I started on April 1, 2000 in the mortgage industry (prior to being in title/escrow). I think the biggest difference is the attitude or atmosphere of underwriters, appraisers and lenders. More are looking at where can we find fault with this loan or what if this goes into foreclosure…I don’t recall this type of fear back then. Of course I was just a pup in my lending career…but I had no problems doing FHA, VA and conforming mortgages…I didn’t know any differently.
Now I’m hearing from some agents that they’re having a tough time with biz. Some are those who became used to getting darn near anyone approved via subprime mortgages and another agent I recently spoke to said she was just plain slow with her business. Listings unwilling to drop their price.
The internet is the wild west for deceptive ads. This one from my old stomping grounds always used to bother me: http://www.dumoney.com/2.25%2525Fixedfor5Yrs
“Fixed 2.25% for 5 Years
The pay rate is FIXED for the first 5 years at a rate as low as 2.25%.”
If memory serves me right, TILA requires an APR if a lender quotes a rate. Besides, I doubt anyone is closing a 2.25% fixed rate for 5 years (if they ever did).
Hello Jillayne,
Deceptive advertising is very pervasive these days. Do you see it getting better any time soon?
Sincerely,
Chris
Hi Chris,
In a word, “no.”
Just throwing out a thought, but maybe we should just make advertising of mortgage rates illegal? My biggest beef with mortgage rate advertising, even when done properly, is that there is no way to really advertise interest rates. On its surface, it is dishonest even if dishonesty isn’t the intent.
Interest rates change everyday and even the most little thing can change the rates consumer qualify for. I have seen mortgage ads with disclosures larger than the ad itself.
Additionally, I think this will change the mindset of consumers. One of the reasons these companies do this type of advertising is because IT WORKS. These are the type of ads consumers respond to. Maybe if banks weren’t running around advertising these ultra low rates consumer would do a little more research and focus in on the quality of the bank and its originators a little more.
Right now the consumer mindset is “So what if the originator has a dollar tattooed on his palm and just got out of jail, he is telling me I can get a 5% 30 year fixed rate!” while the loan originators with MBAs, established books of business are sitting here dumbfounded how we lost the deal quoting 5.875% with barely 1% ysp.
Russ, I think that unless the pricing is live or at least same day, it should not be allowed. How on earth can something thats in professional print (taking days or weeks to create) have a true rate unless it was a complete fluke.
State and federal law such as the TILA (Truth in Lending Act) and the MBPA (Mortgage Broker Practices Act) prohibit lenders from advertising an interest rate that is not actually available at the time.
Lenders can stay in compliance by keeping an advertising/compliance file for each ad, clearly showing that the rate WAS available at the time the ad was published. Many of these ads also say something like “rate only available until….” or “rate subject to change” or “rate depends on qualifying for a specific type of loan” in the fine print.
Russ, I believe that if we make advertising rates illegal that won’t address the underlying cause and we’ll just continue to see deceptive advertising, except it will be something else.
The underlying cause, IMHO:
We have laws and rules but there will never be enough money to police every single ad published by every single lender.
There are folks in our industry who know this. The risks of getting caught, and the potential fines are weighed agains the potential amount of profit, and a decision is made to violate the rule and law.
One solution, IMHO:
The industry as a whole decides, together, that they’ve had enough and they start self-policing each other.
Not everyone wants this solution, that’s okay.
What we must realize then, is that the general public will continue to have a low opinion of the entire industry, believing that we are not to be trusted.
At some point, the tide will turn and the industry will realize that it’s far more difficult to make money when customers don’t trust us, and then we’ll decide to clean up our own industry. It will take all of us who remain, to help each other.
It’s all driven by profits.
Just received this ad:
New rates as low as 1.95% purchase, refi, or cash out. 1.95% fixed payment. No income/asset verification, bankruptcy and foreclosure? Okay! We can close your loan in 10 days…
Here’s another one:
2.6% fixed minimum payment for five years for home loans up to 4 million. No income verification: Okay.
“Have you broken your ARM?” Is your adjustable rate mortgage about to go up? New rates as low as 1.25%”
That’s really bad. Refinance your ARM into….another ARM.
In this vein, as a brand-new homeowner, I’m a bit disgruntled to have received these two offers with deceptive elements in my mailbox:
-A “mortgage insurance” offer that will (supposedly) pay off the loan if I die, become disabled, etc. The deceptive element: at the top, in big letters, it says “Complete and return” right next to the name of my loan origination company and details of my loan amount. Of course, in tiny print at the bottom, it says something like: Loan information obtained from public records and for reference only. If I wasn’t paying attention, I could be led to believe that this was something my lender was requiring from me–after all, they required so many other “insurances” during the loan process.
-A “biweekly” mortgage payment scheme that somehow will magically save me thousands of dollars with no effort on my part. Reference to any costs or downside is in tiny print, and generally downplayed as much as possible. And again, my lender’s name and my loan information are sprinkled liberally throughout to make it appear more official…
Thankfully, I’m in full possession of my mental faculties, have a naturally skeptical disposition, and was warned by my loan officer and escrow person to expect this kind of thing. If I were a little more gullible or easily confused, I could easily be taken in for quite a bit of money; money which I didn’t need to spend…
Hi RickB,
Thanks for stopping by RCG. If you still have the originals, fax them to Allen at Senator Dorgan’s office: 202-224-1193.
I don’t think the Lowermybill ads were any different than anything anybody else was or has been running. Lowermy is not even a lender. They are a referral service. I filled out a Lowermybill ad and four lenders called me to compete for my business. Aren’t the lenders the ones that are required to tell consumers the terms of the contract being signed between the lender and the consumer
Check out this story on Countrywide today if you don’t like “interest rate drops again”
http://pardonmyfrench.typepad.com/pardonmyfrench/2008/04/countrywide-bor.html
B of a is buying countrywide, I would assume they approve of the ad
Its sad senator dorgan has to get involved in enforcing truth in lending act, reg-z or respa
We have laws are 30 years old that nobody has been enforcing. I think there’s a story here. Why? Government bureaucrats with a job for life? Corruption – people on the dole of ameriquest and countrywide? No funding for enforcement?
Kudos to senator dorgan for trying to do so.
I received an ad today in my spam bin advertising 4% interest rates from a “ChristianFamilyLoans.”
Dan, I’m not certain, but I’m pretty sure that individuals have private rights of action under TILA, etc. So it’s not like the banks could violated these acts with impunity.
Two days ago I clicked on a LMB.com ad thinking that it was some kind of online quiz that would give me an idea of what I could expect if I refinanced.
What did I get? When I clicked for my results, it told me I was going to be contacted by several lenders. Imagine my surprise. Sure enough, within minutes I was contacted by 4 companies.
I told each of them the story and apoligized for taking their time. But one “Bill Glick” from Quicken Loans wouldn’t let me go, so I finally told him I was going to hang up. Ever since, he keeps calling me and claims “I can’t hear you, sorry the phone must not be working, please call me so I can talk to you about your loan application.”
He even left me a voicemail stating that he “was worried” and was going to call 911 and tell them I had an emergency at my house because we “keep being disconnected.” Seems my hanging up means I’m medically unfit.
I have been trying to call LMB and get them to do something, but no one seems to care that a lender would harrass someone. is this the way to sell a loan?
I’m in sales, and I can’t imagine how Bill’s actions could possibly get him sales, yet I can’t seem to get the guy off my mind, as he calls me 4 times a day claiming he can’t hear me.