CFPB cracks down on advertising practices.

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On Feb. 12, the Consumer Financial Protection Bureau (CFPB) took action against three mortgage companies for alleged violations of federal advertising rules that prohibit misleading customers about loan programs tied to the federal government. [paragraph] The CFPB maintained that all three lenders misrepresented their affiliation with the U.S. government in direct-mail advertisements in a variety of different ways. [paragraph] Regulation N, the

The facts of each case were slightly different but all involved government mortgage programs, including the Federal Housing Administration's (FHA's) forward and reverse loan programs and the guaranteed loan program through the Department of Veterans Affairs (VA).

Flagship and American Preferred agreed to pay penalties of $225,000 and $85,000, respectively. Both will be required to set up compliance plans that will be subject to CFPB approval. Neither Flagship nor American Preferred admitted or denied any of the CFPB's findings, according to the consent orders.

In the case of All Financial Services, CFPB charges that from November 2011 to December 2012, All Financial, a Maryland-based broker and lender, used advertisements that were deceptive. One example cited by the bureau says that the lender misrepresented that the FHA-insured reverse-mortgage program was a time-limited program or had a deadline by which it expired. Another example cited was that the lender sent a mailer to nearly 200,000 consumers advertising its reverse mortgages that had a seal on the material that resembled the Great Seal of the United States along with a headline that read: "Government Lending Division" and "Housing and Recovery Act of 2008 Eligibility Notice."

The CFPB investigation of Flagship Financial Group found that from August 2011 to December 2012, the company sent mailings implying that its VA loans were endorsed or sponsored by the U.S. Department of Housing and Urban Development (HUD). The company sent ads that said "HUD-Approved Flagship Financial Group has been directed to get VA homeowners instant relief by lowering their monthly payments."

CFPB says the company at the time was not HUD-approved and had no unique affiliation with HUD beyond that of other lenders to originate VA loans. The company also sent tens of thousands of mailers advertising mortgage credit products that looked like government notices, CFPB said.

The third lender targeted by the enforcement proceedings was American Preferred Lending...

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