FTC Investigating Misleading Mortgage Ads
The FTC, or Federal Trade Comission, has announced that it is currently investigating several mortgage lenders for what they called misleading and sometimes downright deceptive advertising practices. Their findings could, in the end, lead to several civil lawsuits from people complaining that they have been detrimentally affected by extremely misleading advertising.
Some of the complaints undoubtedly stem from what is called an ARM loan. An ARM mortgage loan is an Adjustable Rate Mortgage loan, and many times it sounds like a great option to someone who wants a lower mortgage payments, since, when the mortgage rates are low, their monthly payment can be substantially lower than it would be with a fixed rate loan.
However, the problem is, many say that with these ARM and other unconventional loans that are not a fixed rate or term, it is not adequately explained how high their payments could go in the event of an extreme increase in the mortgage interest rate on the loan. This increase in the interest, and subsequent increase in mortgage payment, which many times can mount to hundreds of dollars a month additional and squeezes family’s budgets, is what is being called unjust and inadequately explained by the advertiser.
The FTC cites those ads that we all see every day online, advertising mortgage loans on a $250,000 home for just $615 a month, when in fact, when that loan is amortized, and with a low interest rate, the payment would really mount to more than double that. The FTC is looking to crack down on ads like this that make it sound like people can get a great monthly payment, without explaining the very real possibility of the downside, that is, if it increases, which it invariably will, especially with today’s volatile economy and fluctuating mortgage interest rates.
