[NMLS SAFE] 9, Advertising Rules: Trigger Terms and Bait-and-Switch

Lesson nine of the free Quibank NMLS SAFE course: advertising. Three layers of law govern a mortgage ad — Regulation Z's trigger terms, the state bait-and-switch rule, and Regulation N's ban on lying. Each one shows up on the exam, and each has a clean shape. Layer one: trigger terms.

A radio ad says: own a home for just fourteen hundred fifty dollars a month. Stating a payment amount is a trigger term. So is the amount or percentage of a down payment, the number of payments or period of repayment, and the amount of any finance charge. Use any one of them, and the ad owes the full follow-up.

The follow-up is three things, stated clearly: the amount or percentage of the down payment, the terms of repayment, and the annual percentage rate. Payment amount in the ad — down payment, repayment terms, APR must follow. Not the interest rate alone, and not the lender's identifier — the APR and its two companions. So on the exam: the fourteen-fifty-a-month ad must also disclose what?

Down payment, terms of repayment, and APR. The distractors will offer the total of payments, the amount financed, or only the APR — the trio is the answer. Layer two: the state bait-and-switch rule. The model state law says an originator may not solicit, advertise, or contract for specific rates, points, or terms that are not actually available at the time.

Advertising a rate your company cannot deliver, to make the phone ring, is a prohibited act — and no disclaimer saves it. Rates subject to change does not make a fake rate real. Exam version. An originator advertises a rate-and-points combination his company cannot deliver.

Prohibited — the terms must be actually available at the time of the advertisement. Disclaimers, later corrections at application, and displayed license numbers are all wrong answers. Available means available. Layer three: Regulation N, the mortgage advertising practices rule.

It bans material misrepresentation in any commercial communication about a mortgage product. The classic violation: a private company mailing flyers headlined federal homeowner relief program, guaranteed approval. No government affiliation, guaranteed anything, or miracle payment cuts — a fake government tie is exactly what Regulation N names. Quick check.

A private brokerage with no government ties mails that federal relief flyer. Which rule does it violate? Regulation N — material misrepresentation, including false government affiliation. Keeping a copy on file does not help, and no, it is not puffery.

Recap. Trigger terms: payment amount, down payment, repayment period, finance charge — any one demands the trio: down payment, repayment terms, APR. State law: advertised terms must be actually available, disclaimers cure nothing. Regulation N: no material misrepresentations — especially fake government programs and guaranteed approvals.

Next lesson: the Bank Secrecy Act — fraud red flags, suspicious activity reports, and borrower privacy. Practice today's rules free at quibank.com/mlo. See you in lesson ten.