Though it may be controversial to some in the mortgage industry, I believe that the time has come to ban the advertising of specific mortgage rates.

While I have been thinking about this for several months, I heard a radio commercial today that sealed my opinion.
In the ad, a well-known company offered mortgage loans at 3.1%. There was no mention of any of the following: the type of loan, the APR associated with it, the amortization period, or whether there are points or fees. I’m not mentioning the company because that information is beside the point: the ad in question is representative of what many firms are doing
If this kind of ad is legal today, it should be made illegal tomorrow. There is simply no justification for this kind of promotion if a business has any sense of responsibility to consumers.
Has the mortgage industry become so difficult or slow that lenders are left to employ absolute trickery to attract customers?
Advertising mortgage rates does nothing but mislead and confuse consumers. In the mortgage industry, we always say to consumers that “every situation is unique” and “your rate will depend on your specific circumstances.” If this is true, then advertising a “company rate” is purely a marketing gimmick. It’s designed to convince consumers—without all the facts—that a particular lender may be able to offer better rates than their competitors.
Rather than an all-out ban, I believe that some compromise is possible. Perhaps lenders should be permitted to advertise “best execution” rates based on one or more approved lender surveys. Even so, borrower requirements for credit, down payment, fees, etc. must be explicitly described.
It’s time to stop the assault on common sense and decency that these mythical mortgage rate ads represent. Some in the mortgage industry are engaged in a zero-sum game where either they “win” or a borrower “wins” in each transaction. Is a “win-win” outcome really too much to ask?

    Published on October 15, 2008