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Mortgage Rate Pitches May Deceive, FTC Says

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By ALAN ZIBEL, The Associated Press

Published: September 12, 2007

WASHINGTON - The Federal Trade Commission has warned more than 200 companies about 'potentially deceptive' mortgage advertisements that could give borrowers a false impression of the cost of home loans.

The FTC on Tuesday said ads in newspapers and magazines, online and in the mail 'may violate federal law' by giving a deceptive picture of mortgage terms. It sent the warning letters to mortgage brokers, lenders and media outlets.

'Many mortgage advertisers are making potentially deceptive claims about incredibly low rates and payments, without telling consumers the whole story,' Lydia Parnes, director of the FTC's Bureau of Consumer Protection, said in a statement.

The FTC declined to make available a list of the companies it warned because it has not concluded that the companies are breaking the law.

Lucy Morris, a senior FTC consumer protection attorney, said letters were sent to large and small companies. Media outlets, she said, are not liable for deceptive advertising, but are being encouraged to screen advertising to protect readers and viewers.

In addition, she said, the agency plans to investigate other companies for deceptive advertising practices.

Some advertisements, the FTC said, highlight mortgage rates as low as 1 percent but didn't inform consumers that they often apply for a short, 'teaser' period and can rise substantially.

One Internet advertiser, LendingTree LLC, a site owned by IAC/InterActiveCorp, that matches would-be borrowers with mortgage lenders, urges consumers to borrow '$200,000 for Only $938/Month.'

Only by clicking on the ad, then clicking on to another page, does a potential borrower come up with a page of disclaimers about the advertising terms, which note that 'you may not be matched with the lender making a particular offer.'
LendingTree has not received a letter from the FTC, spokeswoman Allison Vail said Tuesday. The company thinks terms of mortgages advertised are adequately disclosed, she said.

The FTC's Morris declined to comment on specific companies, but she said disclosures of mortgage terms have to be clear.

'It's not enough to bury important information in unreadable fine print,' she said.

Mortgage and financial Web sites are a main source of online ad revenue. LowerMyBills parent Experian Group spent nearly $41 million on online ads last month, according to Nielsen/NetRatings. IAC/InterActiveCorp spent $35.5 million, and Countrywide Financial spent $35.4 million.

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