Spam or scam? Is this mortgage advertising for real?

Mortgage advertising: No longer a jungle out there

You would think that with all the regulations against sending fraudulent mortgage advertising, the promotions would stop coming your way. You know they’re not spam or scams, but you do want to know what ads are legitimate and aren’t aren’t.

That constitutes an ad under federal law might surprise you, too. Government agencies define an ad as just about any message designed to get you to borrow mortgage money. That includes verbal, print and online ads. It means telephone calls and social media and internet banners can be ads.

Lenders must be truthful

Most lenders are honest, only sending you valid ads that tick the right boxes with required information. But, with all the ways to advertise to you, how do you distinguish the differences between the safe and shady marketing promotions?

How to compare home loan offers

Fortunately, regulators make it easy by requiring ads follow a consistent set of standards, and be honest and transparent — meaning most must provide specific information. Here are the components required for residential mortgage advertising to make those promotions legal and what’s illegal in mortgage advertising.

Ads require complete licensing and identification

Mortgage advertising must comply with the Secure and Fair Enforcement for Mortgage Licensing or SAFE Act. Administered by the Consumer Protection Financial Bureau, it requires licensing and registration for all mortgage lenders. Laws require all ads identify the following about a lender:

• Full legal name of the lender or mortgage company
• Full physical address and correct business phone number to the lender
• The name and NMLS of their loan originator
• The equal housing opportunity logo

Before you contact anyone advertising mortgage products, make sure you know who they are. Use the NMLS Consumer Access website to see if the lender identified in the ad matches NMLS. Also, check the lender’s history for fraud or disciplinary records.

Promotions can’t imply government endorsement

One of the most common mortgage ad scams in recent years has been phony promotions from the VA. The only problem is that the VA doesn’t send advertisements for its mortgage programs.

Be wary of lenders who appear just a bit too patriotic in their advertising using apparent government seals, logos or state or US flags. They’re prohibited from implying the government endorses them or backs their products and services.

Complete guide to VA home loans

They can’t say they’re affiliated with any government entity or agency, whether it’s local, state or federal. You should take advertising that confuses or misleads you like this seriously. The government does, and encourages you to complain about advertisers trying to exploit you.

Lenders can’t claim they’ve got your back

The feds take a dim view of those implying or saying they’re supposed to protect you to gain your trust in what they’re selling. Mortgage brokers or lenders shouldn’t tell you they’re acting in your best interest, or as “acting as your fiduciary.”

They’re usually not, and laws don’t require that from them.

Avoid the “no fees” bait and switch

Brokers or lenders can’t use ads that tell you there are no fees to lure you into borrowing from them, only to charge you fees when you do. No mortgage comes without fees and credits for closing costs.

Either you’ll pay fees or credits with an increased loan amount or with higher interest rates.

The "no-cost" home loan and other ways to keep closing costs low

Lenders must be upfront about their fees, which can vary widely from one to the next. Depending on your situation, there may be special fees you have to pay, too. So, make sure you shop around to know what those fees are before you apply.

Don’t believe the guaranteed financing hype

A promotion that looks like a check with your name on it or that guarantees pre-approval is one the government considers deceptive and illegal. You can’t get a loan without qualifying.

The mortgage offer in the mail: Should you accept?

You’ll need to prove that you’re qualified for and able to repay a mortgage, The lender also checks your credit, so there isn’t an easy way around the process.

“No payments” does not mean “no costs”

Borrowers should beware ads for reverse mortgages saying you won’t make any payments. Reverse mortgages get their names because you get money first, then pay the balance later.

However, for most reverse mortgages (they are government-backed), you pay mortgage insurance, which the lender adds to your outstanding balance, and interest, which also increases what you owe.

Reverse mortgage: Who should consider it?

You repay the loan when you or your heirs sell the property.

In addition, you’ll continue to pay for repairs and maintenance. If you fail to pay any of these costs or fees, the lender may pay them on your behalf, withholding those amounts from your proceeds. Or the lender can foreclose.

The fix is (not) in

Just because a mortgage starts out with a fixed rate for an introductory period doesn’t make it a “fixed-rate mortgage.” A fixed-rate mortgage has an interest rate that stays the same throughout the life of the loan.

ARMs and hybrids: no longer the "wallflowers" when rates rise

The interest on adjustable rate mortgage or ARM might start out “fixed” for an introductory period ranging from a few months to ten years, but if it isn’t fixed for life, it’s not a fixed mortgage. Period.

What are today’s mortgage rates?

Today’s mortgages come in a variety of interest rates and terms. One of more of them might be perfect for you. Just compare actual mortgage disclosures and make sure that you’re getting what’s advertised, and that it’ the best you can do before making a commitment.