rates that would be available under the advertised loan for a period less than the full term of the loan . They also did not include a clear comparison to the information required to be disclosed .
For example , 1,141,690 mailers were sent promoting a “ fixed rate of . . . 1.75 %.” The mailer included a statement that a better interest rate has enabled our clients to enjoy an average savings of $ 294.00 per month on their home loans in 2015 , which is over $ 3,500 per year . This implied a comparison between the advertised product ’ s payment and the consumer ’ s current payment . Missing from the mailer was the Regulation Z required information , including each simple annual rate of interest that will apply , the period of time which they each would apply and the APR .
Representations of Debt
At one point , Low Rates sent 40,000 mailers containing statements that they could provide lenders with “ freedom from debt !” in the “ Freedom from Debt Program ” via the “ Freedom from Debt VA Refinance .” However , the lender ’ s cash-out loan does not eliminate all of a consumer ’ s debt . Instead , itself is a debt and , as a result , cannot be used to “ free ” a consumer of debt .
Regulation Z Violations
Most of Low Rates mortgage advertisements contained trigger terms requiring further disclosures . Trigger terms include stating a period of repayment , payment amount , finance charge or simple annual rate of interest . Often the lender stated trigger terms , but failed to include the disclosures . Examples of this are outlined below .
Monthly Payment : 151,675 mailers went to consumers stating a monthly $ 87.48 payment amount . It did not comply with Regulation Z and state the terms of repayment reflecting the repayment obligations over the full term of the loan or the APR .
Introductory Rates : In 151,675 mailers sent out , messaging prominently displayed a 2.25 % introductory rate . However , the period for the introductory rate and the actual subsequent fully indexed rate of 3.45 % were only disclosed in fine print on the second page . based only on the introductory rate . Low Rates did not disclose each payment and the period it would apply over the remaining term of the loan .
Simple Annual Interest Rate : 138,200 mailers were sent mentioning a “ 3 %” simple annual interest rate five times , including twice mentioning rates “ below 3 %.” The advertisement stated the 3 % rate without using the term “ annual percentage rate ,” and while an APR is indicated in small print on the back of the mailer , the statement of a simple annual percentage rate of 3 % on the front of the advertisement is more conspicuous . According to Regulation Z , an advertisement shall not state any other rate , except a simple annual rate applied to an unpaid balance may be stated in conjunction with , but not more conspicuously than , the APR .
Low Rate ’ s Action Steps
The consent order requires the lender ’ s advertising compliance official to review each mortgage advertisement template before any advertisement based on that template is disseminated to consumers to ensure it is compliant with federal consumer protection regulations and the consent order .
This individual must review each direct-mail advertisement as well , and must document in writing his or her review of each advertisement . Should the advertisement include certain elements , additional components must be added to the documentation , including :
• Rate sheet showing availability of advertised rate ( s ).
• Worksheet showing the calculation of the APR , including all inputs assumed when calculating the number .
• The method of arriving at an amount of cash a borrower might receive and include any materials used to determine the availability of that amount .
All employees with responsibilities related to designing , developing or approving the content of Low Rate ’ s mortgage advertisements must participate in annual training on mortgage advertising regulations . The lender must also develop a comprehensive compliance plan for mortgage advertising . •••
Variable Rate : The lender promoted in 151,675 mailers a 30-year variable-rate mortgage with a monthly payment of $ 573.37 . This payment was
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