Pay Option Arm

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

Fictional Mortgage
123 Main Street
Anytown, NY, USA		 Cur Current Mortgage: $475,0001
New Payment: $1,696.912

SAVE OVER $135,545 IN JUST FIVE YEARS
Reduce your payment with a new
1.75% payment fixed for 5 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:

  • Increase your monthly savings
  • Make  investments
  • Consolidate credit cards
  • Buy that new car or boat
  • Make home improvements
  • Pay for college education
  • Pay off taxes or liens
  • Spend however you want

 

START SAVING MONEY NOW!!!
With today’s high cost of housing and living expenses, plus increasing employment uncertainty, isn’t smart to keep your payments low?  Take advantage of these savings and put your money to better use!  The savings that you can achieve may be your first and most important step to realizing financial freedom.

Call us today at 800-555-5555 or visit us online at www.fictionalmortgage and use our 1 minute prequalification tool.

(please see reverse…)

 

Need Cash?
We have loans up to 125% of your
home’s value available to you.

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, 
so your loan is tailored to your needs!

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.

Sincerely,

Joe Fictional, President

Fictional Mortgage is an Equal Housing Lender licensed as a broker under the CA Department of Real Estate, # 3456789.  Loans may be arranged pursuant to California Dept. of Corporations Finance Lenders License.1Current mortgage terms based upon available public records. May reflect fully drawn equity line.2Estimated new payment based upon 30 year ARM with minimum payment option resulting in possible deferred interest.  Actual savings will vary with payment option chosen. Interest rate and amount varies with qualification and property appraisal.  Call your broker for program details.

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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.