Every homeowner gets offers to refinance, and some can be very aggressive and confusing. Not every offer is deceptive, but when mortgage rates fluctuate, there’s a much greater likelihood of fraud.
The shrinking refinance market
It’s certainly not news that mortgage interest rates can often fluctuate. And when rates rise, so too does the desperation on the part of mortgage lenders to compete for the ever-shrinking refinance market.
Most customers who wanted to refinance their mortgages into a lower interest rate have already done so. However, there are many consumers who couldn’t refinance when rates were at their lowest point, or would like to access their home equity now for any number of reasons. Maybe their child is just starting college or they want to complete some home improvements.
Questionable mortgage offers
No doubt most homeowners receive offers to refinance, and these solicitations can be very aggressive and confusing. At Network Mortgage, we frequently receive calls from clients asking us to review baffling offers that they’ve received.
Some letters are about “skipping mortgage payments” and “escrow refunds.” Others seem to come from their current lender (they don’t). Some even appear to come from government agencies like the Veterans Administration (VA) or the U.S. Department of Housing and Urban Development (HUD), but none of them do.
What all of these slickly-produced letters and postcards have in common is that they are considered deceptive, and generally don’t comply with the Mortgage Acts and Practices Advertising Rule, officially known as Regulation N.
What is Regulation N?
Regulation N is also known as the Mortgage Acts and Practices Advertising Rule (or MAPs rule) because it regulates how mortgage lenders, brokers, servicers, advertising agencies, and others can advertise mortgage services. Simply put, the rule forbids deceptive claims in mortgage advertising and other commercial communications sent to consumers.
Misleading mortgage claims
Some examples of deceptive claims prohibited under Regulation N include misrepresentations of:
- The type of mortgage being offered.
- Payments, terms, amounts, or other requirements of the mortgage agreement.
- The nature, amount, or existence of fees associated with a mortgage product.
- The consumer’s ability to refinance or modify the mortgage or its terms.
- Variability of interest rates.
- What percentage of the monthly payment will go towards paying interest, or paying down the balance of the loan.
- Any prepayment penalties that the mortgage may carry.
- The right of the consumer to reside in the dwelling being purchased.
- The potential for default and what circumstances constitute default.
- The nature, substance, and availability of any expert advice or counseling services offered to the customer in regards to a mortgage credit product.
- The source of commercial communication or advertisements regarding mortgage products.
We’re here to help
To be clear, we’re not claiming that every mortgage offer you receive is fraudulent or deceptive. But when mortgage rates are frequently changing, there’s a much greater likelihood that you’ll receive something questionable. If you do get a mortgage or refinance offer — by email or direct mail — and you’re not sure if it’s legitimate. Hold on to it, and give us a call. We’d be happy to review it with you.
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Revised: October 31, 2024 at 6:45:20 PM PDT
