FTC Warns Mortgage Advertisers that Their Ads May Violate Federal Law

Reporting today the FTC warns about Mortgage Advertisers.

After reviewing hundreds of mortgage advertisements, the Federal Trade Commission staff has sent letters to 20 companies, warning them that their ads may be deceptive.

The FTC sent its warning letters to real estate agents, home builders, and lead generators, urging them to review their advertisements for compliance with the Mortgage Acts and Practices Advertising Rule and the FTC Act.

The FTC sent letters in coordination with the Consumer Financial Protection Bureau (CFPB), which issued warning letters to approximately a dozen other companies.  The CFPB sent its warning letters to mortgage brokers and lenders.  Both agencies have opened nonpublic law enforcement investigations of other advertisers that may have violated federal law.

The agencies reviewed approximately 800 mortgage ads from a wide variety of media that included web sites, Facebook, direct mail, and newspapers.  The agencies seek to spur compliance with the Mortgage Acts and Practices Advertising Rule, known as Regulation N since rule making authority for it transferred from the FTC to the CFPB. The rule prohibits material misrepresentations in advertising or any other commercial communication regarding consumer mortgages.  The FTC and the CFPB share enforcement authority over non-bank mortgage advertisers such as mortgage lenders, brokers, servicers, and advertising agencies.  Mortgage advertisers that violate the Rule may be required to pay civil penalties.

The agencies’ review revealed several types of troubling claims that could be misleading to consumers.  Examples are illustrated in these mock ads.  The agencies’ review found, for example:

  • Advertisements offering a very low “fixed” mortgage rate, without discussing significant loan terms.
  • Advertisements containing statements, images, symbols, and abbreviations suggesting that an advertiser is affiliated with a government agency.
  • Advertisements “guaranteeing” approval and offering very low monthly payments, without discussing significant conditions on these offers.

MBA Files Comment letter on Basel III

Yesterday MBA sent their comment letter on Basel III covering Regulatory Capital Rules:

A. Regulatory Capital, Implementation of Basel III: Minimum Regulatory Capital
Ratios, Capital Adequacy, Transition Provisions and Prompt Corrective Action
(Regulatory Capital Rule)

B. Standardized Approach for Risk-Weighted Assets: Market Discipline and
Disclosure Requirements (Standardized Approach)

C. Advanced Approaches Risk-based Capital Rule: Market Risk Capital Rule
(Advanced Approach)

The 84 page letter focused on issues in the following areas of real estate finance:

  • Impact on the Mortgage Market from Basel III
  • Mortgage Servicing Rights (both residential and commercial/multifamily)
  • Residential Mortgage Loans
  • Multi-family/Commercial Real Estate Loans
  • Securitization Exposures
  • Fannie Mae and Freddie Mac MBS (both residential and multifamily)
  • Commercial and Multifamily Servicer Cash Advance
  • Financing Independent Mortgage Companies
  • Off-Balance Sheet Exposure

MBA Basel III Comment Letter


CFPB Releases Proposed Servicing Standards

On August 9, 2012, CFPB Director Cordray held a media briefing announcing the impending release of proposed national servicing standards to protect consumers especially those undergoing challenges in making their monthly payments on mortgages.

“The major failures in this industry demonstrate that all servicers need to meet basic standards of good customer service,” CFPB Director Richard Cordray said in a call with reporters.

He said the proposal reflects “two basic, common-sense standards — no surprises and no runarounds.”

The comment period is 60 days from publication of the proposed rule in the Federal Register.

The proposed rules cover nine major topics and implement Dodd-Frank Act provisions that relate to mortgage servicing.


  • Periodic billing statements (TILA proposal) -Servicers would be required to provide clear billing statements including information on the loan, amount due, and application of past payments.
  • Adjustable-rate mortgage interest-rate adjustment notices (TILA proposal) – Servicers would be required to provide consumers with a new notice 6 to 7 months before the first rate adjustment, as well as earlier and improved notices before rate adjustments causing an increase in a consumer’s mortgage payments.
  • Prompt payment crediting and payoff payments (TILA proposal) – Payments must be applied as of the day they are received, and the handling of partial payments is clarified.
  • Force-placed insurance (RESPA proposal) – Servicers can only charge borrowers for buying insurance on the property when they have a reasonable basis to believe that the borrowers have let their own insurance lapse and have given borrowers two notices estimating the cost of the “force-placed insurance.”
  • Error resolution and information requests (RESPA proposal) -Mistakes happen, but they need to get fixed. Servicers must address borrower concerns about possible errors within certain timeframes and provide the information they request.
  • Information management policies and procedures (RESPA proposal) – Servicers must have reasonable policies to ensure that when borrowers provide documents and information the servicers can find and use them.
  • Early intervention with delinquent borrowers (RESPA proposal) –  Servicers must work with delinquent borrowers with early intervention and information about options available.
  • Continuity of contact with delinquent borrowers (RESPA proposal) – Servicers will insure delinquent borrowers will be able to contact the right people to get information and take steps to avoid foreclosure.
  • Loss mitigation procedures (RESPA proposal) – Servicers would be required to appropriately review borrower applications for loan modifications or other options to avoid foreclosure.

Mortgage servicing companies would be required to provide clear monthly billing statements, warn borrowers before interest rate hikes and actively help them avoid foreclosure. The rules also require companies to credit people’s payments promptly, quickly correct errors and keep better internal records.

The CFPB plans to finalize the rules by January 2013. Comments may be submitted at www.regulations.gov. In addition, the Cornell University e-Rulemaking Initiative (CeRI) and the CFPB are working together to create an online environment for people and groups to learn about, discuss, and react to the proposed mortgage servicing rules, it will be located at www.regulationroom.org

Summary of Proposed Mortgage Servicing Rules

2012 Truth in Lending Act (Regulation Z) Mortgage Servicing Proposal

2012 Real Estate Settlement Procedures Act (Regulation X) Mortgage Servicing Proposal

CFPB Servicing Fact Sheet

SBREFA Report on Servicing

CFPB Forms Testing Report

CFPB Released Memorandum of Understanding (MOU) with FRB, FDIC, NCUA, and OCC

The CFPB yesterdayeleased the attached a Memorandum of Understanding (MOU) with four other federal regulators (FRB, FDIC, NCUA, and OCC), clarifying how the agencies will coordinate their supervisory activities.  The MOU is dated May 16, 2012.

Section 1025 of the Dodd-Frank Act provides that the Consumer Financial Protection Bureau (CFPB) has exclusive authority to require reports and conduct periodic examinations relating to various consumer financial laws and issues, as to insured depository institutions and their affiliates with more than $10 billion in assets.  Similarly, section 1024 provides the CFPB comparable supervisory authority with respect to certain entities that are not insured depository institutions with total assets of $10 billion or more.

However, both sections also require that the CFPB work with the prudential regulators to: (1) coordinate the scheduling of examinations; (2) conduct simultaneous examinations of insured depository institutions with more than $10 billion in assets and their insured depository institution affiliates, unless the institution requests separate examinations; (3) share draft reports of examinations with the other supervising agency, and provide the receiving agency with opportunity to comment on the draft report before it is made final; and (4) take into consideration any concerns raised by the other agency before issuing the CFPB’s final report of examination.

Toward these ends, the regulators announced that, under the attached MOU, the agencies will work with each other and share materials concerning:


  • Compliance with federal consumer financial laws and certain other federal laws that regulate consumer financial products and services;
  •   Consumer compliance risk management programs;
  • Activities such as underwriting, sales, marketing, servicing, collections, if they are related to consumer financial products or services; and
  • Other related matters that the agencies may mutually agree upon.

According to the regulators, “[t]hese coordination undertakings should lead to greater uniformity and efficiencies in supervision and help to minimize regulatory burden on covered depository institutions.”

Copy of MOU attached  MOU – Supervision – CFPB, OCC, NCUA, FRB and FDIC

Richard Cordray named Director of the Consumer Financial Protection Bureau (CFPB)

Richard Cordray
COGNOPS can help with new regulations, disclosures and audits. Contact us today (919) 806-4218
Yesterday, President Obama took the bold political step of using a recess appointment to name Richard Cordray as the Director of the Consumer Financial Protection Bureau (CFPB), effective through the end of the U.S. Senate’s next full session (i.e., year end 2013).

The official announcement was made this afternoon at a campaign-style event in Cleveland, Ohio, a key presidential battleground state. Cordray’s appointment comes over significant objections from both House and Senate Republicans to the governance structure of the bureau. While not objecting to Cordray’s qualifications per se, Republican leaders had been using procedural measures (pro forma sessions) to prevent a recess appointment absent structural changes. Yesterday’s action promises to further exacerbate the political tensions between Democrats and Republicans.

Unless Cordray’s appointment is ultimately found to be unlawful and an injunction issued against the CFPB’s exercise of its new powers, the Bureau will now be able to implement its full range of authority under the Dodd-Frank Act, including the ability to regulate non-bank financial institutions and to issue rules dealing with unfair, deceptive, and abusive acts and practices. Without a Director, the CFPB was limited to using those powers inherited from existing banking regulators. A fully empowered CFPB presents a number of new challenges for our industry.

Although the Dodd-Frank law authorized the consumer agency to regulate the so-called nonbank financial companies, which previously had little supervision, the law was purposely written such that the bureau could not invoke its powers until it had a director. That can now be done.

The bureau had taken responsibility for existing regulations on consumer products at banks and thrifts, it was not able to write new regulations for banking products like mortgages and credit cards until it had a permanent leader.

Are you ready for what is coming? We can help with the new regulations, disclosures and audits. Contact COGNOPS today.