Deceptive Mortgage Ads

October 17, 2007

An increasing number of mortgage lenders, brokers and consumers are complaining about highly deceptive ads, often carried on radio stations. A saturation schedule of radio ads costs a lot less than many other forms of advertising, and certain loan companies are using that media to hawk their offerings in unethical ways. Many of the ads slam competitors and make misleading claims that barely comply (if at all) with advertising requirements in the federal Truth-in-Lending Act. Here’s example copy:

"If your mortgage broker charges any fees at all, they are predatory lenders. Come to us, an honest broker. We charge no fees."

Some consumers will bite on that bait. That’s the reason they keep carrying the ads. But many more understand that there is no such thing as a no-fee mortgage. The lender may offer a mortgage that does not require any upfront cash for fees. But those fees are either wrapped into the balance of the loan, or the interest rate or points are bumped up to compensate for not charging the fees upfront. One way or another, the fees are paid. That type of offering may work well for some borrowers. But it’s important for lenders and brokers to educate borrowers accurately and completely.

Most mortgage lenders and brokers are professional and honest business people. They understandably object to such deceiving claims by a few unscrupulous loan companies that will make any claim in radio or print ads that might attract prospective borrowers. Eventually, this type of unethical practice will tarnish their reputation to the point where they may leave the business.

source:  Jim Woodard

Posted in All Things San Diego, Helpful Hints, Lending, Local Business, Real Estate