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2011 NH/VT Mortgage Compliance Conference. Advertising Compliance Best Practices . Ben Niles, Risk Manager bniles@merrimackmortgage.com 603-606-3272 603-305-0590 (C). Advertising Regulations. Federal Trade Commission Fair Lending Federal SAFE Act State (NH & VT) SAFE Act

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2011 nh vt mortgage compliance conference
2011 NH/VT Mortgage Compliance Conference

Advertising Compliance

Best Practices

Ben Niles, Risk Manager



603-305-0590 (C)

advertising regulations
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
penalties for violations
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
penalties for violations1
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

advertising best practices
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
advertising general rules
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
advertising general rules1
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
advertising general rules2
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 #”
advertising disclaimers
Advertising: Disclaimers
  • Subject to underwriting (credit) approval
  • Terms & conditions may change without notice
  • We arrange but do not make loans (Brokers)
advertising interest rate ads
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
advertising trigger terms
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”
advertising broker
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”
advertising reverse mortgages
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
prohibited deceptive advertising
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
prohibited deceptive advertising1
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”
prohibited deceptive advertising2
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
business cards
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)
internet advertising
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
  • 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”
  • 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.”
email signatures
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
respa section 8
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”
printed materials
Printed Materials
  • Follow General Rules (Slides 6-8)
  • Review text & graphics for accuracy, fairness, balance, & appropriateness
  • Avoid negative comparisons to competition
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
  • 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
telemarketing existing customer
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
telemarketing new customers
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”
lead generation companies
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
social media
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
  • 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.

Ben Niles, Risk Manager

Merrimack Mortgage Company


603-305-0590 (C)