About a dozen mortgage lenders and brokers have been put on notice about their potentially misleading advertisements, especially those aimed at veterans and senior citizens.  The Consumer Financial Protection Bureau (CFPB), in partnership with the Federal Trade Commission (FTC), sent warning letters to the lenders at the same time that the CFPB announced it has begun formal investigations of six companies that it thinks may have committed more serious violations of the law.  The letters were sent after a joint "sweep" was conducted by the two agencies of about 800 randomly selected mortgage-related ads from newspapers, television, and direct mail.  Some of the ads were reviewed following customer complaints.

"Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives," said CFPB Director Richard Cordray. "Baiting consumers with false ads to buy into mortgage products would be illegal. We will conduct a fair and rigorous investigation into these issues and will take appropriate action for any violations we find."

CFPB and FTC were looking for potential violations of the 2011 Mortgage Acts and Practices Advertising Rule which prohibits misleading advertising claims; the two agencies share enforcement responsibility under the rule.  CFPB's review generally focused on mortgage advertisements while the FTC examined ads by home builders, realtors, and lead generators. The FTC is issuing their own warning letters to about a dozen additional companies and continuing with their own investigations of even more companies based on their findings.

Among the potential misrepresentations identified in the sweep were ads that included official-looking seals or logos or had other characteristics that may be interpreted as indicating a government affiliation.  Some ads promoted inaccurately low rates or may have misled consumers about the level of pre-approval offered or the terms of the product.  One example cited by CFPB were ads that offered reverse mortgage products and claimed consumers would have no mortgage payments even though these products commonly require monthly or other periodic tax or insurance payments and carry a risk of default if the payments aren't made.

The warning letters will advise the recipients that their ads may violate federal laws, and that they should review all their advertising. CFPB said that beginning an investigation is not an accusation of wrongdoing. Investigations are fair and reasonable inquiries into a matter and may exonerate the subject of the investigation.