No one in their right mind are really offering these products anymore so we are not putting a lot of information out right now about how to advertise this product. See below for some do’s and don’ts.
LeaNon to Advertise Mortgage Loans the Right Way …
Sample Mortgage Advertisements are Shown Below – Can You Spot the Issues in these Ads?
These Ads are Being Shown Not Because They are “Right” or Proper …..
Rather These Ads are “Wrong” – Can You Find the Mistakes in these Ads?
SAMPLE AD #1
SAVE OVER $135,545 IN JUST FIVE YEARS
Dear John Smith:
You’ve been pre-selected to receive this outstanding offer! We are offering loans with a payment fixed at 1.75% for five years. Our records show this will save you $135,544.80 over the next five years.
By refinancing with Fictional Mortgage, you can immediately stop overpaying and start saving for the future.
This means money in your pocket to:
START SAVING MONEY NOW!!!
Call us today at 800-555-5555 or visit us online at www.fictionalmortgage and use our 1 minute prequalification tool.
(please see reverse…)
At Fictional Mortgage, we realize that your situation is unique. That’s why we focus on your situation. We can help you no matter what your situation is. If you are self-employed or retired, have credit problems, filed bankruptcy – we can help! Our highly trained professionals will guide you through the lending process in the least amount of time, with the least amount of stress to you.
We work with many lenders, with many programs,
If your need lower monthly payments because of a growing family or upcoming retirement, select a 30 year amortization and save money. It’s a fact that most California homeowners move within 3-5 years, so why spend more money during that time? If you want flexible payment options, select a loan that offers a choice of fixed minimum payments, interest only, or full principal and interest based on your needs.
No Junk Fees
There are no “junk” fees! We don’t charge application fees, credit report fees, administrative fees, or any other fees not associated with the processing of your loan.
Call us toll free at 800-555-5555 or prequalify online at www.Fictionalmortgage.com.
That’s all it takes for you to find out how we can help you. Act now to take advantage of Lower payments and Savings.
Joe Fictional, President
Weaknesses of this ad #1:
1. No Disclosure of the APR: Shows payment but the APR is not shown in the ad. This is a violation of Regulation Z and the Truth in Lending Act. The rule is that if you are showing the payment, you have to show the interest rate, the terms of repayment, and the APR.
2. Potential Misrepresentation. The advertisement claims that the borrower could “save over $135,545 in just five years”. However this claim misrepresents that likely a large portion of these savings is offset by the increase in principal balance that will result if the borrower makes only the minimum payment during the first five year period. Remember, on these “option ARM” loans that negative amortization will result if the borrower makes the minimum payment since the minimum payment does not pay all of the interest that is due each month. Such unpaid interest is added to the principal balance of the loan in each month that the consumer makes the minimum payment.
3. Suggestions for Option Arms ads:
Explain how the program works – make it clear that if the borrower pays the 1.75% rate, negative amortization will occur and unpaid interest will be added to the principal balance of the loan.
Also, it has been required by federal regulators and the majority of the states who have recently frowned on the use of exotic mortgage products such as the MTA Option ARM that the worse case scenario rate and payment amounts should be disclosed to the borrower. The main goal is to ensure consumer awareness of the dangers posed by these loan products if the consumer can only afford the minimum payment.
4. Ad does not comply with the Guidance on Nontraditional Mortgage Products
There are new required disclosures for Non-traditional Mortgage Products. Nontraditional mortgage products include your Option Arms (that have the potential for negative amortization) and loans that have “interest only” provisions. Note that the guidance suggests that lenders and brokers should provide a balanced disclosure of the benefits and risks of Option ARMs and Interest only products. This disclosure must be included in all promotional materials (advertisements) for these products. A clear disclosure of the risks involved in payment option ARMs should be included in the advertisement.