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Marketing from a Regulatory Perspective

By Tory Barringer

Super Bowl ads are designed to be memorable, but one ad in particular no doubt stood out in the minds of any mortgage banking professionals who watched this year’s game. The 60-second spot, created and paid for by Quicken Loans, promoted the company’s “Rocket Mortgage,” which promised to “[do] for mortgages what the internet did for buying music and plane tickets and shoes”—in other words, to allow consumers to obtain a mortgage entirely online, even via smartphone.

Within minutes, the company’s Twitter feed was inundated with skeptical tweets and predictions of a new housing meltdown on the horizon. Even the Consumer Financial Protection Bureau (CFPB) got in on the action, albeit subtly, tweeting only minutes after the ad premiered: “When it comes to #mortgages, take your time, ask questions and #knowbeforeyouowe,” followed by a link to the bureau’s own homebuyer tools.

While cooler heads pointed out that Quicken Loans’ Rocket Mortgage was by no means a throwback to the bad old days and did nothing to loosen credit requirements, and although the CFPB’s tweet did not specifically call out the company or its product, the quick response from the agency sent a clear message: We’re watching what you say, so you better be, too.

Other companies have learned that lesson the hard way. In just the last couple of years, the CFPB has pursued advertising-related enforcement actions against a number of businesses in the mortgage banking space, with penalties ranging from five to seven figures. All of those firms allegedly engaged in what the bureau called “deceptive” marketing.

As we approach the 10-year anniversary of the housing and financial crisis that crippled the nation, it’s not hard to see why consumers, politicians, and regulators would bristle at an advertisement promoting quick and easy homeownership, even if the product and process themselves are safe and sound. The reality, however, is that mortgage marketing is leaps and bounds ahead of where it was pre-crisis, due in no small part to the fact that the products on offer are much less risky.

The Truth in Lending Act has long required certain parameters for mortgage advertising.  But those rules were largely developed without some of the non-traditional mortgages that proliferated before the crisis, including loans with interest only payments or negatively amortizing payments.  “Before the housing crisis, there were a lot of non-traditional products being offered.  “

“Non-traditional mortgage products have generally gone away,” explained Kathleen “Kitty” Ryan, counsel at BuckleySandler’s District of Columbia office and former deputy assistant director for the CFPB’s Office of Regulations,“So in some respects, it may be somewhat easier to explain a loan’s features in advertising than it was before the crisis.”

Smoke and Mirrors

While the products on offer today may be more cookie cutter than they were previously, other challenges remain for the marketing officer tasked with figuring out a way to showcase them without stepping out of bounds. As the crisis unfolded, regulators and Congress responded by amending the Truth in Lending Act (TILA), and the Federal Trade Commission issued the Mortgage Acts and Practices (MAP) advertising rule.  And, of course, Dodd-Frank’s prohibition on unfair, deceptive, or abusive acts and practices (UDAAP) was enacted by Congress in 2010 to hammer home the point that that aggressive  behavior will not be tolerated in advertising.

In addition to these changes, marketing officers havethe overall feeling that the CFPB and other agencies have largely been engaging in rulemaking by enforcement. Indeed, the CFPB’s list of resources on the topic includes a number of consent orders regarding the enforcement actions mentioned above. And though those orders serve as a chilling reminder of what can happen if you don’t toe the line, that doesn’t make them any less valuable a tool for a marketing team (as well as the compliance team that is hopefully keeping a watchful eye out), says Ryan.

“In designing a marketing campaign, it would be wise to review the CFPB’s enforcement actions and identify the types of statements were that were deemed deceptive,” she said. “That way, you can get an indication of where the CFPB enforcement staff believes the boundaries are.”

With that in mind, let’s take a look at the releases outlining some of the CFPB’s marketing-focused consent orders.

  • Amerisave Mortgage Corporation, its affiliate, Novo Appraisal Management, and company owner Patrick Markert: “[T]he Bureau found that Amerisave … advertised low interest rates that were not available … Locked consumers in with costly up-front fees … Failed to properly disclose its affiliate relationship … Charged unfairly inflated prices for services through its affiliate[.]”1
  • RMK Financial Corporation: “[F]or deceptive mortgage advertising practices, including ads that led consumers to believe that the company was affiliated with the U.S. government. … RMK’s ads also contained misrepresentations about the loans’ interest rates and estimated monthly payments, including whether the interest rate was fixed or variable.”2
  • Flagship Financial Group: “The CFPB investigation discovered that from August 2011 to December 2012 the company sent mailings implying that its VA loans were endorsed or sponsored by the U.S. Department of Housing and Urban Development (HUD). … Flagship Financial Group has no unique affiliation beyond that of other lenders to originate VA-guaranteed loans and was not ‘HUD-Approved’ at the time it claimed in its advertisements to have that status.”
  • American Preferred Lending: “CFPB’s investigation revealed that American Preferred Lending … sent mailings to potential consumers that appeared as if they were U.S. government notices, obscuring that they were actually from American Preferred Lending.”
  • All Financial Services: “The Bureau alleges that the company misrepresented that the source of the advertisements was, or was affiliated with, a government entity. They also misrepresented that the FHA-insured reverse mortgage program was time-limited or had a deadline. … The Bureau also alleges that the company falsely said that no monthly payments are required ‘whatsoever’ under a reverse mortgage ‘as long as you and your spouse live in the home.’”3

And so, a pattern emerges: If your marketing suggests affiliations that you do not actually have, and/or doesn’t tell potential consumers the significant facts they need to know before making a decision, you’re putting a target on your company’s back.

However, while the finalized rules provide a generalized, high-level look at habits to avoid, it’s through enforcement that the details of the compliant marketing picture have really started to become clear.

“[The bureau is] using deception as a legal theory, and they find various things that financial institutions say and do to be deceptive,” Ryan explained. “Those things are not written down in rules anywhere, so you have to go through the consent orders to figure out what’s deceptive.”

And it’s not just mortgage cases. While it’s understandable that a mortgage banking professional might get wrapped up in only the rulemakings and cases that stem from their industry, don’t forget that the CFPB, Federal Trade Commission, et al. are responsible for the oversight of the entire financial services industry (and beyond, in the FTC’s case). Thus, while a rule or enforcement action related to credit cards, for example, may not strictly apply to mortgage products, they can still provide some insight as to what the bureau is thinking when it comes to deceptive statements or tactics.

Other Advertising Pitfalls

While “deceptive” seems to be the word of the day for marketers caught out by the CFPB, UDAAP is certainly not the only concern when it comes to mortgage advertising. As larger banks compete for wallet share, they have to be very careful about the message they send to potential customers. For example, Bank X might advertise their automated payment portal as a way to pay off a mortgage faster and reduce the total interest paid. At least one company has already been targeted for allegedly misrepresenting the interest savings customers could see by paying biweekly. For those interested in how not to market such a program, here’s an example of the language the CFPB isolated in its release as being problematic: “Many of the company’s marketing materials promise that consumers who enroll will save money, with language such as ‘Am I guaranteed to save money? Yes!’ Other documents contained statements like ‘soon you will be … saving thousands of dollars in unnecessary payments.’”4

Then there’s the issue of who you’re marketing to. Advertising directed at consumers with limited English proficiency and elderly Americans is sure to attract extra attention from financial regulators.

And finally, there are marketing services agreements (MSAs). While HUD has historically considered MSAs on a case-by-case basis, last year the CFPB issued a bulletin that suggested a much more critical stance, noting, “The Bureau has received numerous inquiries and whistleblower tips from industry participants describing the harm that can stem from the use of MSAs, but has not received similar input suggesting the use of those agreements benefits either consumers or the industry.”5  While the CFPB did indicate that “determining whether an MSA violates RESPA requires a review of the facts and circumstances surrounding the creation of each agreement and its implementation,” the bulletin was enough to spur many already skeptical organizations to set aside MSAs entirely.

As the CFPB continues to pour its resources into matters it feels are more pertinent in terms of consumer protection, the specific rules around advertising may remain on the fuzzy side for some time. As with all other matters of compliance, the best bet is to remain vigilant and avoid behavior that could even possibly be interpreted as misleading or predatory.

“Collateral that is consumer-facing should be carefully scrubbed, Ryan said. “You can promote your product, but describe it clearly and avoid overstating its benefits.”


Tory Barringer is an experienced mortgage journalist and managing editor of Mortgage Compliance Magazine. He can be reached at TBarringer@MortgageComplianceMagazine.com.


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