Love it or hate it, social media is a critically important tool that lenders and servicers must utilize in order to attract new customers and stay on the cutting edge of contemporary marketing strategies. But how does one safely navigate the cluttered tangle of federal mortgage regulations and their ambiguous reach when it comes to the relatively new world of online advertising? There are many federal and state regulations designed to keep the mortgage industry fair for all and recent years have seen current laws fine-tuned to include social media, as well as new regulations specifically created for this brave new world of marketing potential.
Among the numerous federal controls put in place to protect consumers over the past several decades are the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), as well as the discovery and elimination of Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). These widely known and studied tools are designed to root out historically implemented trickery used by less trustworthy lenders or officers to, in effect, swindle uninformed customers out of their hard earned cash. Perhaps less known is the reasonably new Regulation N from 2010, also known as the Mortgage Acts and Practices (MAP) Advertising Rule. This regulation expressly standardizes how agencies, brokers, and lenders are allowed to advertise their services and forbids marketing materials from including deceptive claims.
Unfortunately for advertisers, “I didn’t know I couldn’t do that” isn’t an acceptable excuse when it comes to the Consumer Financial Protection Bureau’s (CFPB) enforcement of federal regulations. A seemingly innocent, but problematic, Facebook or LinkedIn post by a social media representative could potentially lead to fines or even prison time for the offender. With that in mind, there are several pitfalls that must be avoided when marketing your product on social media.
In a nutshell, any form of misrepresentation of offers or services is an instant infraction of Regulation N. Servicers and advertisers may not mislead potential customers as to the type of service being offered or disguise the fact that the service includes “hidden fees”. Marketing materials cannot misrepresent the type of a loan, the terms, payments, and interest rates of the loan, or even the future likelihood of the customer being able to refinance their loan. Nonexistent “preapprovals” or false promises regarding the ease of approval via non-targeted advertisements are also punishable offenses of Regulation N.
As with most, if not all, federal and state mortgage laws, the onus is on the servicer/broker/lender - and not the regulator - to ensure that industry rules are being followed appropriately and completely. Mortgage advertising may seem to be a minefield of impossible-to-follow hazards and perils, but the reality is often less complex than initially thought: a servicer needs simply to represent their product and/or service fairly, truthfully, and within the confines of the law, and they may continue to energetically compete in today’s ever-expanding market without fear of federal reprisal or punishment.