What’s wrong with this internet mortgage ad?
What do you think about this email mortgage ad that we saw this week. It advertises The Harp program but has at least one flaw in our view …
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New Loan Advertisements we are Seeing
3 Way Ad shows ARM, Heloc and 30 Year Fixed
This Postcard Mailer advertises an ARM, Heloc and 30 Year Fixed Rate Loan. The main offer however is for an ARM.
Notice that the ARM product being offered is a 5-5 ARM. We don’t see that product that often. Recall that a 5-5 ARM means the rate is fixed (in this case the ad shows an interest rate “as low as 2.75%) for the initial five year period and then the rate will adjust only once every five years. This differs from 5-1 ARMs where the rate can adjust once every 12 months. The index is a 5 year CMT.
Click on the ad to get a closer view of the detail. We like the way the ARM payment changes are disclosed but the font size is a bit small to manage with ease. Notice that the ad also discusses rates and payments on a 30 year product though no real offer was made on a fixed rate loan in the ad. It’s a very thorough disclosure of Reg Z required disclosures but may be a bit more than what is needed which forced the lender to use a smaller font size.
FTC Looks to Purchased Search Terms in Deceptive Advertising Complaints
Troutman Sanders law firm put out a good article on two recent FTC enforcements. “Given these decisions, it is particularly important for businesses engaged in internet marketing to carefully consider the search terms they use to drive customers to their websites. If words purporting to describe a product or service would not be accurate when stated directly to consumers through traditional advertising, then businesses should not use those words to describe their goods or services through keywords.”
Summary from the Troutman Sanders LLP article: These two companies were charged with deceptive trade practices.
1) Lumos Labs, Inc., the owner of the online “brain game” portal Lumosity was charged for deceptive trade practices for making it sound like their brain puzzle game could help prevent Alzheimer’s disease. The FTC complaint against Lumocity stated: “Defendants have employed an extensive search engine campaign, including through Google AdWords, and have purchased hundreds of keywords, including many variations of words related to memory, attention, intelligence, brain, cognition, dementia, and Alzheimer’s disease.”
2) Stratford, a for profit web-based school offering degrees to students seeking high school diplomas engaged in deceptive trade practices by misrepresenting that their high school equivalency course would give its graduates he program would help students with career advancement and enable them to apply to college (this was not true, the program they offered fell short of the required courses and many employers and colleges did not view this as the equivalent of a high school diploma). “The search terms Strafford bought were “official high school diploma,” “high school diploma equivalent,” and “real high school diploma online,” in order to direct potential students to the Stratford website.”
So what we learn here is we need to be careful about the actual keywords we buy to promote our services if such keywords are not representative of the products or services we are offering. Note that the keyword purchases were a factor among other advertising done by these companies and the totality of the circumstances will likely be reviewed by the regulator to find the violation.
For the entire Troutman Sanders Article – see FTC Looks to Purchased Search Terms in Deceptive Advertising Complaints
Realtor Ad – Advertises Real Estate Services and Mortgage Origination
Here’s an advertisement that offers both real estate sales or listing services and also great rates on purchase loan mortgages.
This Broker advertises all of these services out of her American United Mortgage Corporation.
So you can get help with selling your current home at only a 1% commission. You can also get a free mortgage rate evaluation.
This raises the question whether a real estate agent can earn both a commission on the sales transact and a fee on the mortgage transaction. The answer is No on HUD FHA loans but most states seem to allow this with full disclosure to the borrower (that you are getting paid on both deals) on non FHA loans.
Read more about this Realtor Ad.