- The Washington Times - Wednesday, September 12, 2007


The Federal Trade Commission has warned more than 200 companies about “potentially deceptive” mortgage advertisements that could give borrowers a false impression of the cost of home loans.

The FTC yesterday said ads that ran in newspapers and magazines, online and in the mail “may violate federal law” by giving a deceptive picture of mortgage terms. It sent the warning letters to mortgage brokers, lenders and media outlets.

“Many mortgage advertisers are making potentially deceptive claims about incredibly low rates and payments without telling consumers the whole story,” said Lydia Parnes, director of the FTC’s Bureau of Consumer Protection.

The FTC declined to make available a list of the companies it warned because the agency has not definitively concluded that the companies are breaking the law.

Lucy Morris, a senior FTC consumer protection attorney, said the letters were sent to large companies and small ones. Media outlets, she said, are not liable for deceptive advertising, but are being encouraged to screen advertising to protect their readers and viewers.

The agency plans to investigate other companies for deceptive advertising practices, she said.

Some ads highlighted mortgage rates as low as 1 percent but didn’t inform consumers that they often apply for a short “teaser” period and can rise substantially, the FTC said.

While some people were probably betting that they could refinance their loans before the rates reset, others might not have been informed adequately of the risks.

The FTC’s Ms. Morris declined to comment on specific companies, but said disclosures of mortgage terms have to be clear.

“It’s not enough to bury important information in unreadable fine print,” she said.

The FTC has detailed guidelines on how mortgage lenders should advertise their products to comply with federal law. The agency said the ads, some of which were in Spanish, were identified in June as part of a nationwide review.

The government’s action comes as regulators heighten scrutiny of mortgage lending amid soaring rates of default among subprime borrowers.

Federal Reserve Chairman Ben S. Bernanke said in hearings on Capitol Hill over the summer that the Fed would propose changes to federal rules on mortgage marketing by the year’s end.

Those changes are needed, Mr. Bernanke said, to address concerns about ads “that may be incomplete or misleading and to require lenders to provide mortgage disclosures more quickly.”

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