New Federal Trade Commission ("FTC") Rule Has Implications for Brokerages
The FTC recently issued its Mortgage Acts and Practices – Advertising Rule (“MAP Rule” or “Rule”). The Rule imposes requirements on those that provide information about mortgage credit products to consumers by prohibiting misrepresentations during these communications and also imposing recordkeeping requirements. The Rule takes effect on August 19, 2011.
The Rule will impact real estate professionals who provide information about a specific mortgage product to a consumer. An example would be providing a consumer with rate sheets containing the current interest rate from a lender or providing a consumer with applications or other information for a specific mortgage product. The Rule does not apply to purely informational communications not designed to cause the purchase of a good or service because these are not commercial communications. So, providing a consumer general information about market rates for different types of mortgages products will likely not be subject to the Rule because these are not related to a specific mortgage product. Similarly, going through the prequalification process with a consumer in order to determine the range of properties that a consumer may be eligible to purchase won’t require compliance with the Rule.
All statements about the terms of a mortgage will be covered by the Rule, and will need to be retained for 2 years from the date that the communication was made to the consumer. The real estate professional should put all covered statements into writing and include the statements in each consumer’s file (paper or electronic) with the brokerage. This record retention system should become part of the brokerage’s overall record retention program. In addition, the statements should have the disclaimer language discussed below in order to protect against later misrepresentation claims.
Disclaimer or Qualifying Statement
The FTC notes that a disclaimer provided with a covered statement “may correct a misleading impression, but only if it is sufficiently clear and prominent to convey the qualifying information effectively”. Therefore, real estate professionals should always include a disclaimer when providing information to consumers about the terms of a mortgage credit product, as a properly crafted disclaimer can protect against later misrepresentation claims.
NAR has created model disclaimer language for MAP advertising:
This communication is provided to you for informational purposes only and should not be relied upon by you.
[Name of brokerage] is not a mortgage lender and so you should contact [entity providing mortgage
product(s) identified] directly to learn more about its mortgage products and your eligibility for such products.
The disclaimer must be prominent and should be separated from the other text in the covered statement. Additionally, it should be tailored to the type of information provided to the client. If one is providing other services beyond transmitting basic mortgage information, one must tailor the disclaimer to cover those services. The disclaimer should be provided in text at least as large as the body text and should be placed in a location so that the disclaimer is readily apparent to the consumer receiving the mortgage information. MAR is analyzing the Rule and will provide additional guidance as needed. For additional information regarding the Rule, you may go to: http://www.realtor.org/letterlw.nsf/pages/0811maprule.