News

Real estate professionals need to be aware of a new FTC rule — “Mortgage Acts and Practices – Advertising,” aka, MAP.

Among other things, it prohibits misrepresentations and imposes recordkeeping requirements on anyone who provides information about mortgage products to consumers.

This affects real estate professionals, because “providing information” can mean something as simple as giving a client a lender’s rate sheet.

The FTC originally proposed the MAP rule in 2009; the goal was to regulate unfair or deceptive practices in the advertising of mortgage products, whether by mortgage brokers, lenders, home builders, and anyone else involved in the process. And, despite NAR’s efforts to get an exemption for real estate professionals, that includes real estate professionals when they provide information about a mortgage product to a consumer.

The rule’s requirements

The MAP rule prohibits misrepresentations in a commercial communication about any term of a mortgage credit product. And “commercial communication” is broadly defined: It covers any oral and written statement designed to “create an interest in purchasing goods or services” — in this case a mortgage credit product. That means any form of credit that is offered to a consumer and secured by the consumer’s dwelling.

And what kind of statement is considered to be creating such an interest? The definition is broad — any information about mortgage terms is covered, and under “mortgage terms,” the FTC includes interest rates, amount of taxes, variability of interest rates, prepayment penalties, and products sold in conjunction with a mortgage such as credit insurance.

The rule applies to real estate professionals when they provide any information about the terms of a specific mortgage product to a consumer. For example, by giving a client a rate sheet for a particular lender, or providing an application for a specific mortgage product.

So what kinds of mortgage-related communications aren’t covered? General information about market rates or types of mortgage products will likely not be subject to the rule (unless it’s related to a specific lender’s product).

Similarly, explaining to a client how a mortgage prequalification works doesn’t fall under the rule, but providing that client with a particular lender’s documentation for preapproval is covered.

General information? Probably not covered. Information about a specific product or lender? Probably covered.

Disclaimers and recordkeeping

So a Realtor® gives a client information that falls under the rule. What does that mean? What does she have to do to be in compliance?

For starters, provide a disclaimer on whatever documents you give out or written statements you make; a properly crafted one can protect against later misrepresentation claims.