Beware of Deceptive Ads in Search of Home Loan

1/4/2013, 11:29 a.m.

The District's homeowners and buyers need to be more careful nowadays. Several residents have contacted the city's Department of Insurance, Securities and Banking suspecting that the mortgage advertisements in their mail or mail hand-delivered to their door may be deceptive.

The department advises people to beware of misleading and deceptive advertisements for refinancing or for reverse mortgages directed particularly at older people, members of the military and veterans.

You may see or hear these ads touting low interest rates and payments on the Internet, on television, in the paper or by fax or mail. Some look like they are from your mortgage company or a government agency. Remember that while the offers are tempting, some don't disclose the true terms of the deal they're selling, as the law requires.

The Federal Trade Commission and the Consumer Finance Protection Bureau say they have already contacted at least 20 mortgage lenders and brokers concerning potential violations of the Mortgage Acts and Practices Advertising Rule that took effect August 2011.

Here are things to watch out for:

* Official-looking seals or logos that imply the offers come from the Veterans Administration or the Department of Housing and Urban Development. Remember: although government agencies do guarantee some loans, they are not involved in the actual lending or advertising of loans.

* Promises of amazingly low rates - which may turn out to apply only for a short period before they readjust higher.

* Promises that a reverse mortgage will let you stay in your home payment-free. Typically borrowers with reverse mortgages still have to make tax and insurance payments - and can lose their homes if they don't.

* Announcements of "pre-approval" and claims of large amounts of cash or credit available to you. Typically there is no guarantee that you will be approved for a loan, or the size of the loan, until you go through a standard qualification process.

Remember, the better the ads sound, the worse the deal probably is. Some advertisers will use your military or veteran status as a way to approach you, promising special deals or implying Veterans Administration approval.

Others will use the lure of a "no-payment" reverse mortgage to troll for older Americans desperate to find a way to stay in their home when they can no longer afford a mortgage payment. And although mortgage rates are low right now, an offer promising "historically low rates" may still have hidden traps that turn it into a bad deal.

So be cautious and keep in mind that if you get an ad that sounds a little (or a lot) too good to be true, you should get more information from a trusted source or call this department.

The Federal Trade Commission and the Consumer Financial Protection Bureau have also published information on deceptive mortgage ads. You can easily find their websites online.

Take the time to know before you sign to owe.

For information on financial matters or to report abuse, email the D.C. Department of Insurance, Securities and Banking at disbcomplaints@dc.gov ; go to www.disb.dc.gov; or call (202) 727-8000.