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The housing market is bouncing back, and so are deceptive marketing practices. That has prompted the Consumer Financial Protection Bureau and the Federal Trade Commission to launch investigations into six mortgage lenders and brokers that allegedly target veterans and senior citizens with misleading advertising. The regulators also sent warning letters on Monday to a dozen more companies, urging them to review their marketing materials and be sure they aren’t breaking federal law.
The lenders appeared to be trying to dupe consumers into thinking loans were government-backed, according to the CFPB. (The government does back some loans but doesn’t solicit borrowers through advertising.) Some of the ads sent to the elderly included a return address (PDF) line that read “Government Loan Department,” used a logo that resembled the seal of the U.S. Department of Housing and Urban Development, and displayed a Web URL bearing the initials of the Federal Housing Administration, the CFPB says. Veterans received ads that appeared to come from the U.S. Department of Veteran’s Affairs and offered rates under a special “economic stimulus plan” (PDF) said to be expiring soon, according to the CFPB. (VA loan programs don’t have expiration dates.) The ads began with the phrase, “The VA is offering you,” and used logos similar to the VA’s. The ads also promised a “fixed” rate for a 30-year loan even though the fine print indicated that the rates were adjustable, according to the CFPB.
To sniff out the allegedly suspect lenders, the regulators conducted a sweep of 800 randomly-selected mortgage-related ads that appeared in newspapers, online, or that lenders sent by mail between January and September. Citing confidentiality concerns, the government didn’t release the names of the companies under investigation. One thing that’s clear: Major banks aren’t involved. The investigations are being conducted under the Mortgage Acts and Practices Advertising Rule, a regulation that doesn’t apply to retail banks.
Holly Petraeus, the CFPB’s assistant director for the Office of Servicemember Affairs, has this advice for consumers: “Please, be cautious. If you get an ad that sounds a little (or a lot) too good to be true, you should get more information from a trusted source before you respond to the offer.” The wife of former CIA Director David Petraeus apparently isn’t letting the brouhaha over her husband’s affair distract her from work.