Advertising Rules

Beware of UDAP and UDAAP in Your Mortgage Ads

There’s been a lot of enforcement on UDAAP lately in mortgage ads so what do we need to watch out for?

Some tips to be aware of:

  • When reviewing your ads, make sure the that the advertisement materials are accurate and easy to read.
  • Don’t use terms like “pre-approved” or “guaranteed” if in fact the recipient has not been preapproved or is not guaranteed to receive a loan from you.
  • Make sure your train your employees about UDAAP avoidance
  • Use scripts or call guides in your sales process to protect against UDAAP processes
  • Be careful about using small print or footnote disclosures to clarify what you mean in your advertised offer.
  • Avoid anything confusing or unclear in your headlines and your marketing message in your advertisements

See our UDAAP Article for More of these rules

Advertising a Down Payment Triggers Additional Disclosures

If your company wants to advertise a three percent down payment that can be used to purchase a new home, this reference of the three percent down payment triggers additional disclosures.

What needs to be disclosed? The Annual Percentage Rate (APR) and the “terms of the repayment” need to be disclosed.

But what the heck are the terms of the repayment? Is this the loan term, the loan product type? The interest rate?

Here’s the answer:
2. Disclosure of repayment terms. The phrase “terms of repayment” generally has the same meaning as the “payment schedule” required to be disclosed under §1026.18(g). Section 1026.24(d)(2)(ii) provides flexibility to creditors in making this disclosure for advertising purposes. Repayment terms may be expressed in a variety of ways in addition to an exact repayment schedule; this is particularly true for advertisements that do not contemplate a single specific transaction. Repayment terms, however, must reflect the consumer’s repayment obligations over the full term of the loan, including any balloon payment, see comment 24(d)(2)–3, not just the repayment terms that will apply for a limited period of time. For example:

i. A creditor may use a unit-cost approach in making the required disclosure, such as “48 monthly payments of $27.83 per $1,000 borrowed.”

ii. In an advertisement for credit secured by a dwelling, when any series of payments varies because of the inclusion of mortgage insurance premiums, a creditor may state the number and timing of payments, the fact that payments do not include amounts for mortgage insurance premiums, and that the actual payment obligation will be higher.