Written By: Karen Deis
Regulation Z covers many areas of consumer credit—but the most misunderstood and widely misused is the section that governs the way you advertise mortgage information!
To quote the law (regarding open-end and closed-end loans when it applies to owner-occupied real estate) it covers “any commercial message that promotes consumer credit”. One more important piece of information—this law ONLY applies to residential properties that are to be owner-occupied. (So if the listing or your ad is plainly geared towards “real estate investors” you don’t have to disclose the financing terms.) Additionally, the law applies to any real estate financing that requires 4 or more payments!
First, the definition of a “creditor” means anyone who has financed 5 or more transactions in the prior year! If a seller is offering financing, they are exempt from the law unless they are in the business of providing home mortgages.
Have you ever prepared a “finance sheet” for a real estate agent?
Have you co-marketed (paying for your fair share of the cost of the ad) in a real estate magazine?
Do you have rates displayed on your website, blog page, billboards, electronic signs, window displays?
Are you involved with foreclosure properties where your company is approved to “finance” the resale? (Yep, Fannie and Freddie and you are NOT exempt!)
If you are complying with the law, and your competitors are not, I have always thought, hey if I have to provide the disclosures in my ads, they do, too! In fact, throughout my mortgage career, I have reported both banks and mortgage companies to the FTC and my State’s Financial Department. What I can tell you is that they sent a letter immediately and my competitors complied right away!
Reg Z advertising rules can be very intimidating and fines of up to $10,000 per infraction are normal. To date, the largest fine paid by a builder was $300,000.
Here’s a Reg Z Advertising Rule Primer and a handy reference chart for Fixed, Buy downs and Variable Rate Loans! (As always, be sure to check with your attorney if you have any questions.)
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