A Hermeneutical Method of Condition Advertising

 

A Hermeneutical Method of Condition Advertising

We’re frequently requested by what is or perhaps is not allowed in nonbank advertisements. Lots of people understand the federal guidelines established in Regulation Z, the implementation regulating the reality in Lending Act.

However, many people do not know the condition needs. The possible lack of knowledge of condition advertising needs happens a great deal with multi-condition lenders. There is a good grasp of the home condition advertising rules, however this diminishes in order they add increasingly more states for their geographical footprint.

Multi-condition residential home loan originators do okay home based condition banking examinations within the overview of advertisements, but advertising in other states can, and frequently does, pose a menace to a clear examination audit within this category.

Within our Advertising Manual, there exists a whole section dedicated to “Do’s” and “Don’ts” associated with advertisements. But it may be useful to check out one condition particularly, as a type of guide, to determine how that state’s advertising rules stack facing similar rules in other states. Obviously, taking one state’s guidelines like a template isn’t recommended. Many states vary from each other regarding advertising needs. So, a licensee should investigate the statutory mandates in every condition.

 

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Mortgage Compliance Forum: A Hermeneutical Approach to State Advertising
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statements, or other printed materials, including applications
Electronic media, including Internet home pages and electronic
billboards
Signs, either interior or exterior, and displays, and billboards
Radio, television, or public address system broadcasts
Oral communications between financial institution employees and
actual or potential customers, including telephonic and face-to-
face solicitations or response to inquiries
Communications made through Facebook, LinkedIn, Twitter, text
messaging, and other social media avenues
Under Regulation Z, an advertisement is “a commercial message in any
medium that promotes, directly or indirectly, a credit transaction.”[i]
Additionally, there are so-called “triggering terms,” which are specific terms
used in various advertising media that “trigger” additional disclosure
mandates.
Regulatory frameworks and rules most associated with advertising are the
Fair Housing Act, Equal Credit Opportunity Act, Truth in Lending Act, Fair
Credit Reporting Act, Federal Trade Commission rules, Mortgage
Advertising Rules, FHA Regulations, Real Estate Settlement Procedures
Act, and, of course, state requirements.
I could pick a bevy of states that have comprehensive and nuanced
advertising guidelines. I thought it might be worthwhile to look at Virginia’s
requirements, as a hermeneutical exercise in getting a sense for what to
consider as possible de minimis guidelines. Requirements may vary from
state to state. For instance, a state may require an advertisement to have
a specific licensee category and the state’s own banking department name
(i.e., “Licensed Mortgage Banker, [Name of] State Banking Department”).
Doing more disclosure than is minimally required by the applicable statute,
in order to ensure proper disclosure to the consumer, is a fine way to
ensure a ‘best efforts’ approach toward a financial institution’s safety and
soundness.
Virginia’s advertising statute goes back a long way.[ii] For our purposes of
extracting some interpretive applications for other states’ advertising
guidelines, let’s take a look at Virginia’s guidelines.
There are nine separate categories in Virginia’s statute, and I will
paraphrase and describe each of them. Assume that the requirements
must be met by mortgage lenders and mortgage brokers alike, which I will
refer to as “RMLO,” for Residential Mortgage Loan Originator. Use the
categories as a basic checklist and then go to each state’s advertising
statute to do a comparative analysis.
1. Every advertisement used by, or published on behalf of an RMLO must
clearly and conspicuously disclose the following information:
a. The name of the RMLO as set forth in the license issued by the
banking department.
b. The abbreviation “NMLS ID #” followed immediately by both the
unique identifier assigned by the Registry to the RMLO and the
April 2013 (1)
June 2012 (1)
March 2012 (2)
January 2012 (1)
November 2011 (2)

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address for the NMLS Consumer Access website in
parenthesis. For example: NMLS ID # 999999
(www.nmlsconsumeraccess.org).
c. If an advertisement contains a rate of interest, a statement that
the stated rate may change or not be available at the time of
the loan commitment or lock-in.
d. If an advertisement contains specific information about a
consumer’s existing mortgage loan and such information was
not obtained from the consumer, a statement identifying the
source of such information (i.e., public court records, credit
reporting agency, and so forth).
2. The RMLO may not deceptively advertise a mortgage loan, make false
or misleading statements or representations, or misrepresent the
terms, conditions, or charges incident to obtaining a mortgage loan.
3. An RMLO may not use or cause to be published an advertisement that
states or implies the following:
a. It is affiliated with, or an agent or division of, a governmental
agency, depository institution, or other entity with which no such
relationship exists; or
b. A consumer has been or will be “preapproved” or “pre-
approved” for a mortgage loan, unless the RMLO
i. discloses on the face of the advertisement in at least 14-
point bold type that “THIS IS NOT A LOAN APPROVAL”
and
ii. clearly and conspicuously discloses the conditions
and/or qualifications associated with such preapproval.
This provision is intended to supplement the
requirements of the Fair Credit Reporting Act
(FCRA),[iii] relating to firm offers of credit.
4. The RMLO is not permitted to use or cause to be published any
advertisement that gives a consumer the false impression that the
advertisement is being sent by the consumer’s current noteholder or
lienholder. If an advertisement contains the name of the consumer’s
current noteholder or lienholder, it may not be more conspicuous than
the name of the RMLO using the advertisement.
5. An RMLO may not deliver or cause to be delivered to a consumer any
envelope or other written material that gives the false impression that
the mailing or written material is an official communication from a
governmental entity, unless required by the United States Postal
Service.
6. If an advertisement states or implies that a consumer can reduce the
monthly payment by refinancing the current mortgage loan, but as a
result of such refinancing, the consumer’s total finance charges may
be higher over the life of the loan, an RMLO must clearly and
conspicuously disclose to the consumer that by refinancing the
consumer’s existing loan, the consumer’s total finance charges may be
higher over the life of the loan.
7. Every advertisement used by, or published on behalf of, an RMLO
must comply with the disclosure requirements for advertisements
contained in the Truth in Lending Act and Regulation Z.[iv]
8. For purposes of advertising, the term “clearly and conspicuously”
means that a required disclosure is reasonably understandable,
prominently located, and readily noticeable by a potential borrower of
ordinary intelligence.
Mortgage Compliance Forum: A Hermeneutical Approach to State Advertising
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9. Every RMLO must retain for at least three years after it is last
published, delivered, transmitted, or made available, an example of
every advertisement used, including but not limited to solicitation
letters, commercial scripts, and recordings of all radio and television
broadcasts, but excluding copies of Internet web pages.
Note that this state’s statute invokes the application of Regulation Z’s
advertising rules as well as the FCRA’s guidelines relating to Firm Offers
of Credit. In conducting a thorough review of advertising requirements
state by state, it is tempting to see a state’s rules as an overlay to the
federal rules. They are not overlays at all, but carefully promulgated
guidelines that are enforced meticulously by state banking departments.
Where there is a difference between the state and federal rules, the rule
that is more restrictive will prevail. Always go beyond the minimum
advertising requirements, as the best protection to the nonbank financial
institution and the consumer is based on comprehensive disclosure.
[i] 12 CFR, PART 226, Subpart A, §226.2(a)(1)(2)
[ii] 10 VAC 5-160-60. Advertising, Official Virginia Administrative Code, current through 31:22
VA.R June 15, 2015. Fast-track regulations current through 31:11, January 26, 2015 [§§ 6.2-
1613 and 12.1-13, Code of Virginia] Virginia Register, Volume 22, Issue 18, which was first
effective on September 1, 2006, then amended on January 28, 2013, in Virginia Register,
Volume 29, Issue 12. January 26, 2015 it was continued.
[iii] 15 USC § 1681 et seq.
[iv] 12 CFR, Part 226

Labels: Advertising, Equal Credit Opportunities Act, Fair Housing Act, Federal Trade
Commission, FHA, FHA Regulations, Mortgage Advertising Rules, Regulation X, Regulation Z,
RESPA, Truth in Lending
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