Lenders and others in the housing community have been warned -- repeatedly -- about misleading advertising. But precious few alerts have gone out to their potential victims.
The latest to bear the wrath of regulators were lenders approved to originate government-insured mortgages. They were told recently by Carol Galante, assistant secretary for housing and commissioner of the Federal Housing Administration, to stop insinuating that loan approval is a slam dunk just three years after a foreclosure.
It's not, of course. Although you may be able to qualify, you first have to re-establish good credit, and fully documented underwriting is required. So the "suggestion" that someone automatically qualifies is just not so.
"Automatic" is one of those buzzwords solicitors like to use to snare unsuspecting victims. But it's far from the only one. "Free," of course, is another, as are phrases such as "no obligation" and "no payments necessary." Ha!
One of the most insidious ploys that mortgage market tricksters use is to make their messages appear as if they come from the government. There probably isn't a man or woman among us who hasn't been on the receiving end of an official-looking envelope from Uncle Sam. Only it's not.
Upon close inspection, that seal in the upper left corner isn't a real seal of a real agency. But if someone is at the end of his rope and hopes the government will ride to his rescue, he might give the envelope a quick glance and then open it. And once he does, the fish may be hooked.
In November, the Consumer Financial Protection Bureau and the Federal Trade Commission told a dozen mortgage lenders and brokers to clean up their acts regarding "potentially misleading" advertising, including mailings that contained official-looking logos or had other characteristics indicating a government affiliation or connection.
Some outfits have used a photo of the Statue of Liberty or other iconic federal structure to make recipients think the mailing is from a government agency. But there's no such thing as the Department of Residential Refinancing or the Office of Foreclosure Rescue.
Ladies and gentlemen, the government does not advertise. But if you are not sure, look up the agency in the blue pages of your telephone directory. If it exists, it will be listed. If it's not listed, it's phony.
Then there are what the FTC calls "official look-alikes," the ones that say something like "Important Notice From Your Mortgage Company" or "Open Immediately, Important Financial Information Enclosed."
Beware: These kinds of missives often are from a rival outfit trying to snatch you away from your current lender or loan servicer. They find your information legally in the public records and then use it to make you think you are dealing with your current company.
Lenders aren't alone in their zeal to corral unsuspecting consumers. Builders are sometimes guilty, too. And realty agents have been known to fudge listings -- adding a nonexistent fourth bedroom, for example -- to attract customers to an otherwise ordinary property.
The nefarious Top 10 list of complaints assembled by the Consumer Federation of America is riddled with housing-related gripes. Mortgage-associated grievances are the second most frequent complaint, followed by home improvement issues (third), utilities (fifth), landlord/tenant problems (seventh) and, new to the list last year, time shares (ninth).
Even media outlets that carry real estate advertising have been warned a time or two by the FTC to stop running bogus advertising.
Just how big a problem is deceptive advertising? Over the years, the FTC has brought numerous actions against companies in the mortgage lending field, nailing several large judgments that have returned millions of dollars to consumers.
Five years ago, the FTC sent letters to more than 200 advertisers and media outlets, warning about deceptive content. For example, some ads touting super-low loan costs used the term "payment rate" as opposed to "interest rate," while others failed to point out that the low advertised figure applied for only a short period.
In 2009, the consumer watchdog agency issued a rule to strengthen protections against deceptive mortgage ads. Among other things, the rule banned misrepresentations concerning fees and terms associated with home loans, the type of loan offered and the variability of payments, and the likelihood of obtaining financing at the stated terms.
The rule applies to all entities within the FTC's purview -- mortgage companies, brokers and servicers; real estate agents and brokerage firms; and homebuilders -- but not banks, savings institutions or credit unions. And the shady stuff keeps coming.
The joint CFPB-FTC advisory in November warned nearly a dozen mortgage firms and others to clean up their advertising acts, especially as they applied to senior adults and military veterans. The ads in question baited unsuspecting borrowers with false terms, much the way auto ads quote lower leasing costs to mask the much higher monthly payments associated with buying a car.
Now the FHA has told lenders that "misleading advertising will not be tolerated." Maybe so, but that won't stop advertisers from pushing the limits -- and going a step or two beyond. So buyer, beware. Be at least skeptical of what you read, and proceed cautiously.
As Sgt. Phil Esterhaus said on "Hill Street Blues," "Be careful out there." Or perhaps this stronger admonition from the 1986 Jeff Goldblum film "The Fly" is even more applicable: "Be afraid. Be very afraid."