2011 NH/VT Mortgage Compliance Conference

1. 2011 NH/VT Mortgage Compliance Conference Advertising Compliance Best Practices Ben Niles, Risk Manager bniles@merrimackmortgage.com 603-606-3272 603-305-0590 (C)

2. Advertising Regulations • Federal Trade Commission • Fair Lending • Federal SAFE Act • State (NH & VT) SAFE Act • RESPA Sec 8: Kickbacks • Note: CFPB will combine/rewrite these Regs

3. Penalties for Violations • FTC (fraudulent, unfair, & deceptive business practices): Almost No Limit • Countrywide: $108M; Empire Mortgage: $1.5M • Note: FTC does not regulate banks & credit unions • Fair Lending: AIG $6.1M. DOJ has 18 active investigations & 50 referrals • Reg B- ECOA: Actual damages + $10,000 punitive damages • Class Action Liability: Lesser of $500,000 or 1% of Creditor’s net worth • Federal SAFE Act: LO- $25,000 fine for unfair, deceptive, unethical, & fraudulent business practices; consumer has 6 yrs to file a complaint

4. Penalties for Violations • NH/VT SAFE Act: LO- $25,000 fine for unfair, deceptive unethical, & fraudulent business practices - Consumer has 6 yrs to file a complaint • RESPA Sec 8: Fine of $10,000 &/or 1 Yr Prison Term - Civil Penalty of 3 X illegal kickback • Reg Z TILA: MDIA increased civil penalty to $400/$4,000 min/max per occurrence - Class Action Liability: lesser of $500,000 or 1% of Creditor’s net worth

5. Advertising Best Practices • Written Advertising Policy • Approval of All Advertising • Business cards • Print, newspaper & magazines • Flyers & brochures, newsletters • Radio & TV ads • Email ads • Internet Websites • Social Media • Telemarketing • Lead Generators • Maintain Records

6. Advertising: General Rules • LO NMLS ID # immediately after or under name • Include both Lender & LO NMLS ID #’s • Trigger terms require full disclosure of loan terms • All words & logos must be legible, clear, & conspicuous • Fine print should be avoided • Content must be accurate, fair, & balanced • “Equal Housing Lender” logo or verbiage required

7. Advertising: General Rules • Address in advertising must match the address on license (branch location) • LO home address is never allowed • If rent is paid for business space, license must be for that location • License number must be displayed on all media- business cards, flyers, brochures, print ads, email signatures, websites, social media sites, etc

8. Advertising: General Rules • LO’s licensed in multiple states, list all states where ads appear (circulation) • State specific disclosures • NH: “Licensed by the New Hampshire Banking Department” • RI: “Rhode Island Licensed Lender” • MA: “MA License #”

9. Advertising: Disclaimers • Subject to underwriting (credit) approval • Terms & conditions may change without notice • We arrange but do not make loans (Brokers)

10. Advertising: Interest Rate Ads • APR with interest rate, same font or larger • Only: APR is acceptable • Only: APR and Rate is acceptable • Trigger terms will require full disclosure of financing terms

11. Advertising: Trigger Terms • Trigger terms requiring full disclosure • amount or % of down payment • amount of payment • number of payments • term of repayment • amount of finance charge • ARMs: include payment caps, max rate & payment, frequency of rate change, index, & margin. • Exception: “100% VA Financing”

12. Advertising: Broker • Acting as a Broker- ad must say: • “We arrange but do not make loans” • MA: “MA Broker License # • CT: “Mortgage Broker Only, not a Mortgage Lender or Mortgage Correspondent Lender”

13. Advertising: Reverse Mortgages • Can not say “no payment” • Must include tax & insurance information • Don’t use misleading/deceptive wording: • Government Program, Government Benefit • Government Insured, Government Guaranteed • Use “FHA Insured Mortgage” • Ads should be complete, fair, & balanced

14. Prohibited/Deceptive Advertising • Bait & switch advertising • False or misleading statements • “No Points” when points are required • “Bad Credit, No Problem”, without disclosing details- such as higher rate & fees • “Avoid Foreclosure” in your ad • “Tax Deductibility” in you ad

15. Prohibited/Deceptive Advertising • “Immediate Approval” in your ad • “Pre-Approvals” as a Broker • “Fixed” in an ARM loan (5/1 as fixed rate) • Using the ARM “teaser rate” without rate & payment changes • “Government Loans” & not FHA or VA • “Debt Elimination”

16. Prohibited/Deceptive Advertising • Advertising yourself as a “Loan Counselor” • Using facsimile of currency or a check • Using official government business format or language • Not identifying yourself and your company in telemarketing calls

17. Business Cards • LO NMLS # next to or just below name • Company or Branch NMLS# at bottom • Cell Phone- # yes, home landline- no • State specific disclosures: MA, ME, NH, RI • See General Rules (Slide #8)

18. Internet Advertising • Follow general rules (Slides #6-8) • Collecting non-public personal info: • Website must be secure (encryption) • Website must display “security logo” • If website takes an application: • Include electronic signature verbiage • Include consumer acknowledge

19. Websites • Follow general rules (Slides # 6-8) • E-Sign compliance required • Security & Logo if non-public info collected • Maintain & keep site up-to-date • Products, programs, requirements, staff, LO’s • Follow “trigger disclosure” requirements • Include “privacy disclosure”

20. Websites • Include info about your bank or company: • Company history • How you do business • Consumer Acknowledgement: • “I authorize ABC Bank and/or assigns to check my credit, employment history and information in this application for the purpose of determining my credit worthiness. I acknowledge this information is confidential.”

21. Email Signatures • Name, Title, LO NMLS#, • Bank or Company name & NMLS# • Business address, telephone numbers, fax • Email & website addresses • Confidential & privileged information statement • OPT OUT provision

22. RESPA Section 8 • Joint advertising- realtors & builders • Cost is shared proportionally based on space • Events, i.e. - homebuyer workshop • shared cost • both are presenters • Kickbacks: Prohibits gifts of anything of value unless services are rendered • Prohibits paying for referral or fee splitting • Keep records of the “sharing costs”

23. Printed Materials • Follow General Rules (Slides 6-8) • Review text & graphics for accuracy, fairness, balance, & appropriateness • Avoid negative comparisons to competition

24. Radio/TV • Review “hard copy” of script for compliance • Speed & volume of radio voice should be constant • Avoid fine print & “flash graphics” in TV ads • Retain copy of script in your records • Include NMLS #’s • Provide toll-free telephone number • State that the number may be called for additional cost information

25. Telemarketing • Recommend that “trigger leads” be prohibited • Scrub leads against Do Not Call Lists • MMC uses Gryphon Networks • Recommend that spam email be prohibited • Spam fax is illegal unless you have prior consent • All telemarketing employees must be licensed or registered Loan Officers

26. Telemarketing: Existing Customer • Closed a loan within past 18 months • Inquiries within past 3 months • Recommend you have “Opt In” for solicitations • Over-rides Do Not Call Lists

27. Telemarketing: New Customers • Cold Calling: • Scrub call lists against Do Not Call Registry • Info you must provide: • Your name • Company name, address, email & phone # • Contact person, other than yourself • Comply with all disclosure Regs for Rates & APR • Call between 8 AM & 9 PM • Keep a log for 5 years • NH prohibits “computer generated calls”

28. Lead Generation Companies • Should be approved prior to use • Companies must be fully vetted • review contract or agreements • review & approve all materials, i.e. - scripts, mailers, internet ads, banner ads, etc • Active or live solicitation & collecting consumer info is “solicitation”: Licensing issue • Passive leads from mining public data-bases is OK: no contact with the consumer

29. Social Media • Facebook, My Space, Twitter, LinkedIn, Blogs, You Tube, Plaxo, etc • Should be approved prior to use • You are advertising- follow the policies • Include NMLS #’s, etc • Avoid “trigger terms” • Keep it professional: no political rants on your Blog • Include a privacy notice

30. Disclaimer • The content of this presentation is for information purposes only. I am not an attorney and am not providing legal advice. • It is recommended that you also seek guidance from your legal counsel for compliance issues and questions.

31. Questions? Ben Niles, Risk Manager Merrimack Mortgage Company 603-606-3272 603-305-0590 (C) bniles@merrimackmortgage.com