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2011 NH/VT Mortgage Compliance Conference

Advertising Compliance Best Practices

Ben Niles, Risk Managerbniles@merrimackmortgage.com603-606-3272603-305-0590 (C)

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Advertising Regulations

Federal Trade Commission Fair Lending Federal SAFE Act State (NH & VT) SAFE Act RESPA Sec 8: Kickbacks Note: CFPB will combine/rewrite

these Regs

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Penalties for Violations FTC (fraudulent, unfair, & deceptive business practices): Almost

No Limit Countrywide: $108M; Empire Mortgage: $1.5M Note: FTC does not regulate banks & credit unions

Fair Lending: AIG $6.1M. DOJ has 18 active investigations & 50 referrals

Reg B- ECOA: Actual damages + $10,000 punitive damages Class Action Liability: Lesser of $500,000 or 1% of Creditor’s

net worth

■ Federal SAFE Act: LO- $25,000 fine for unfair, deceptive, unethical, & fraudulent business practices; consumer has 6 yrs to file a complaint

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Penalties for Violations

NH/VT SAFE Act: LO- $25,000 fine for unfair, deceptive unethical, & fraudulent business practices

- Consumer has 6 yrs to file a complaint RESPA Sec 8: Fine of $10,000 &/or 1 Yr Prison Term

- Civil Penalty of 3 X illegal kickback

Reg Z TILA: MDIA increased civil penalty to $400/$4,000 min/max per occurrence

- Class Action Liability: lesser of $500,000 or 1% of Creditor’s net worth

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Advertising Best Practices Written Advertising Policy Approval of All Advertising

Business cards Print, newspaper & magazines Flyers & brochures, newsletters Radio & TV ads Email ads Internet Websites Social Media Telemarketing Lead Generators

Maintain Records

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Advertising: General Rules

LO NMLS ID # immediately after or under name Include both Lender & LO NMLS ID #’s Trigger terms require full disclosure of loan terms All words & logos must be legible, clear, &

conspicuous Fine print should be avoided Content must be accurate, fair, & balanced “Equal Housing Lender” logo or verbiage required

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Advertising: General Rules Address in advertising must match the

address on license (branch location) LO home address is never allowed If rent is paid for business space,

license must be for that location License number must be displayed on

all media- business cards, flyers, brochures, print ads, email signatures, websites, social media sites, etc

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Advertising: General Rules LO’s licensed in multiple states, list

all states where ads appear (circulation)

State specific disclosures NH: “Licensed by the New Hampshire

Banking Department” RI: “Rhode Island Licensed Lender” MA: “MA License #”

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Advertising: Disclaimers Subject to underwriting (credit)

approval

Terms & conditions may change without notice

We arrange but do not make loans (Brokers)

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Advertising: Interest Rate Ads

APR with interest rate, same font or larger

Only: APR is acceptable

Only: APR and Rate is acceptable

Trigger terms will require full disclosure of financing terms

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Advertising: Trigger Terms Trigger terms requiring full disclosure

amount or % of down payment amount of payment number of payments term of repayment amount of finance charge ARMs: include payment caps, max rate &

payment, frequency of rate change, index, & margin.

Exception: “100% VA Financing”

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Advertising: Broker

Acting as a Broker- ad must say: “We arrange but do not make loans”

MA: “MA Broker License #

CT: “Mortgage Broker Only, not a Mortgage Lender or Mortgage Correspondent Lender”

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Advertising: Reverse Mortgages

Can not say “no payment” Must include tax & insurance information Don’t use misleading/deceptive wording:

Government Program, Government Benefit Government Insured, Government

Guaranteed Use “FHA Insured Mortgage” Ads should be complete, fair, & balanced

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Prohibited/Deceptive Advertising

Bait & switch advertising False or misleading statements “No Points” when points are required “Bad Credit, No Problem”, without

disclosing details- such as higher rate & fees

“Avoid Foreclosure” in your ad “Tax Deductibility” in you ad

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Prohibited/Deceptive Advertising

“Immediate Approval” in your ad “Pre-Approvals” as a Broker “Fixed” in an ARM loan (5/1 as fixed

rate) Using the ARM “teaser rate” without

rate & payment changes “Government Loans” & not FHA or VA “Debt Elimination”

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Prohibited/Deceptive Advertising

Advertising yourself as a “Loan Counselor”

Using facsimile of currency or a check

Using official government business format or language

Not identifying yourself and your company in telemarketing calls

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Business Cards LO NMLS # next to or just below name

Company or Branch NMLS# at bottom

Cell Phone- # yes, home landline- no

State specific disclosures: MA, ME, NH, RI

See General Rules (Slide #8)

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Internet Advertising

Follow general rules (Slides #6-8) Collecting non-public personal info:

Website must be secure (encryption) Website must display “security logo”

If website takes an application: Include electronic signature verbiage Include consumer acknowledge

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Websites

Follow general rules (Slides # 6-8) E-Sign compliance required Security & Logo if non-public info collected Maintain & keep site up-to-date

Products, programs, requirements, staff, LO’s Follow “trigger disclosure” requirements Include “privacy disclosure”

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Websites

Include info about your bank or company: Company history How you do business

Consumer Acknowledgement: “I authorize ABC Bank and/or assigns to

check my credit, employment history and information in this application for the purpose of determining my credit worthiness. I acknowledge this information is confidential.”

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Email Signatures

Name, Title, LO NMLS#, Bank or Company name & NMLS# Business address, telephone numbers,

fax Email & website addresses Confidential & privileged information

statement OPT OUT provision

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RESPA Section 8 Joint advertising- realtors & builders

Cost is shared proportionally based on space

Events, i.e. - homebuyer workshop shared cost both are presenters

Kickbacks: Prohibits gifts of anything of value unless services are rendered Prohibits paying for referral or fee splitting

Keep records of the “sharing costs”

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Printed Materials

Follow General Rules (Slides 6-8)

Review text & graphics for accuracy, fairness, balance, & appropriateness

Avoid negative comparisons to competition

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Radio/TV

Review “hard copy” of script for compliance Speed & volume of radio voice should be

constant Avoid fine print & “flash graphics” in TV ads Retain copy of script in your records Include NMLS #’s Provide toll-free telephone number State that the number may be called for

additional cost information

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Telemarketing

Recommend that “trigger leads” be prohibited

Scrub leads against Do Not Call Lists MMC uses Gryphon Networks

Recommend that spam email be prohibited Spam fax is illegal unless you have prior

consent All telemarketing employees must be

licensed or registered Loan Officers

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Telemarketing: Existing Customer

Closed a loan within past 18 months

Inquiries within past 3 months

Recommend you have “Opt In” for solicitations

Over-rides Do Not Call Lists

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Telemarketing: New Customers Cold Calling:

Scrub call lists against Do Not Call Registry Info you must provide:

Your name Company name, address, email & phone # Contact person, other than yourself Comply with all disclosure Regs for Rates

& APR Call between 8 AM & 9 PM Keep a log for 5 years NH prohibits “computer generated calls”

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Lead Generation Companies

Should be approved prior to use Companies must be fully vetted

review contract or agreements review & approve all materials, i.e. - scripts,

mailers, internet ads, banner ads, etc Active or live solicitation & collecting

consumer info is “solicitation”: Licensing issue

Passive leads from mining public data-bases is OK: no contact with the consumer

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Social Media

Facebook, My Space, Twitter, LinkedIn, Blogs, You Tube, Plaxo, etc

Should be approved prior to use You are advertising- follow the policies Include NMLS #’s, etc Avoid “trigger terms” Keep it professional: no political rants on your Blog Include a privacy notice

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Disclaimer

The content of this presentation is for information purposes only. I am not an attorney and am not providing legal advice.

It is recommended that you also seek guidance from your legal counsel for compliance issues and questions.

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Questions?

Ben Niles, Risk ManagerMerrimack Mortgage Company

603-606-3272603-305-0590 (C)

bniles@merrimackmortgage.com