Thursday, September 23, 2010

FTC Issues Proposed Mortgage Advertising Rules

The Federal Trade Commission issued a proposed rule would prohibit all material misrepresentations in advertising about consumer mortgages, allow civil penalties, and allow enforcement by the states.

The Federal Register Notice is available at:

The proposed rule lists 19 examples of misrepresentations about fees, costs, obligations, and other aspects of credit that would be violations. However, the proposed rule does not include any advertising disclosure requirements.

The proposed rule would apply to: (1) mortgage lenders, brokers, and servicers; (2) real estate agents and brokers; (3) advertising agencies; (4) home builders; (5) lead generators; (6) rate aggregators; and (7) other entities under the FTC’s jurisdiction.

As you may recall, currently under the FTC Act, the Commission may bring actions against those under its jurisdiction who engage in deceptive mortgage advertising, and seek injunctive relief against them. Under the proposed rule, the FTC would be able to bring actions against violators to seek civil penalties in addition to injunctions. The proposed rule would also allow the states to bring actions for civil penalties for violations of the rule.

The FTC is seeking comments about the proposed rule’s costs and benefits, including whether any alternatives would adequately protect consumers at a lower cost. The FTC seeks public input on whether there are advertising disclosures that the Commission should include in the rule. The FTC also seeks public comment on whether the rule should include a provision that prohibits persons from providing substantial assistance to those who violate the rule.

The Notice of Proposed Rulemaking has a 45-day public comment period ending November 15, 2010.

FTC Settles Mortgage Lending Discrimination Case for $1.5M

The Federal Trade Commission reached a $1.5 Million settlement with a mortgage lender and its owner as to charges that the lender illegally charged Latino consumers higher prices for mortgage loans than non-Latino white consumers, which could not be explained by the applicants’ credit characteristics or underwriting risk.

Copies of the FTC’s complaint, and the Stipulated Final Judgment and Order For Permanent Injunction and Other Equitable Relief, are available at:

The FTC filed a complaint in the U.S. District Court for the Central District of California on May 7, 2009, alleging that Golden Empire Mortgage, Inc. and Howard D. Kootstra violated the Equal Credit Opportunity Act. According to the FTC, the defendants allegedly gave loan officers and branch managers wide discretion to charge some borrowers, in addition to the risk-based price, “overages” through higher interest rates and higher up-front charges. The FTC alleged that the defendants then paid loan officers a percentage of the overages as a commission, failed to monitor whether Latino consumers were paying higher overages than non-Latino white borrowers.