The Consumer Financial Protection Bureau and the Federal Trade Commission are taking on deceptive mortgage advertising and marketing in the latest enforcement actions from the government agencies.
Specifically, the two agencies worked together in a sweep of more than 800 mortgage ads to assess whether the ads violated the Mortgage Acts and Practices -- Advertising Rule established in 2011. The MAP rule states that non-bank entities advertising mortgages cannot materially misrepresent the product's fees, interest, affiliation with government agencies, or availability to consumers.
"Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives," said CFPB Director Richard Cordray in a press release. "Baiting consumers with false ads to buy into mortgage products would be illegal. We will conduct a fair and rigorous investigation into these issues and will take appropriate action for any violations we find."
A total of 32 warning letters -- 20 from the FTC and 12 from the CFPB -- were sent to companies that have violated the MAP rule, advising them how to correct minor infractions. For the more serious violations of the MAP rule found during the sweep, the FTC has opened 13 investigations, but would not specify which companies were under investigation.
The government agencies highlighted four specific trends in the deceptive ads:
1. Ads that misrepresented the companies as having ties with official government agencies like Veterans Affairs or the Department of Housing and Urban Development via official-looking logos or seals.
2. Ads that inaccurately promoted interest rates as lower than they actually were.
3. Promises of no-cost reverse mortgages, despite the fact that mortgages could go into default if certain payments were not made.
4. Ads that promised a certain amount of cash available to customers who would refinance or get a reverse mortgage.
Holly Petraeus and Skip Humphrey, who work for the CFPB on consumer protection issues for service members, veterans and senior citizens, released some tips for consumers to protect themselves from these deceptive ads. Petraeus and Humphrey say consumers in general should be wary of any ads that sound too good to be true, but some other red flags are promises of guaranteed approval and cash upfront.
The two also noted that many of the ads are specifically targeting older Americans, veterans and servicemembers.
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