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FTC Issues Warning on Mortgage Lenders’ Ads

The Federal Trade Commission (FTC) is warning mortgage brokers and lenders, and media outlets that carry their advertisements for home mortgages, that some of the advertising claims currently appearing in Web sites, newspapers, magazines, direct mail, and unsolicited e-mail and faxes may violate federal law.

Many mortgage-related advertisers are making potentially deceptive claims about incredibly low rates and payments, without telling consumers the whole story–for example, that these low rates and payments apply for a short period only and can go up substantially after the loan’s introductory period. Home ownership is the American dream, but it should not become a nightmare for consumers who do not have the information they need to understand the terms of their mortgage!

In warning letters, the FTC is advising more than 200 advertisers and media outlets that some mortgage ads are potentially deceptive or in violation of the Truth in Lending Act. The ads, including some in Spanish, were recently identified during a nationwide review focused on claims for very low monthly payment amounts or interest rates, without adequate disclosure of other important loan terms. For example, some ads touted rates as low as “1%” but failed to disclose:

  • …that the stated rate was a “payment rate”–not the interest rate–that applied only during the loan’s initial period
  • …that low advertised payments applied for only a short period
  • …the loan’s Annual Percentage Rate (APR), the uniform measure of the cost of credit that enables consumers to shop for and compare mortgage offerings.

Some ads promoted only incredibly low monthly payments but failed to adequately disclose the terms of repayment, including payment increases and a final balloon payment.

During the past decade, the FTC has brought 21 actions against companies in the mortgage lending industry, focusing in particular on the subprime market. Several of these cases have resulted in large monetary judgments, with courts collectively ordering that more than $320 million be returned to consumers. These enforcement actions have targeted deceptive or unfair practices in all stages of mortgage lending, from advertising and marketing through loan servicing, by mortgage lenders, brokers, and loan servicers.

To help consumers recognize deceptive mortgage ads, the Federal Trade Commission has created a Consumer Alert, “Deceptive Mortgage Ads: What They Say; What They Leave Out.”

Posted By: Ralph Roberts @ 5:28 pm Comments (2)
Filed under: FTC


  1. Will wonders never cease! The FTC is actually doing something, although it is too little, too late. The FTC has been granted powers to enforce such consumer protection rules as FACTA and to bring suite against violators. The problem is, FTC has no interest in pursuing or documenting consumer complaints and you can expect no help from them whatsoever. They were created specifically for the enforcment of Finance Industry Regulation enforcement following the great Savings and Loan self-inflicted crash. You, the taxpayer, paid for that and you pay for the enforcement job that is NOT intended to be consumer protection, but BANK protection. The FTC is just another Fed entity collecting free money for no reason. I challenge FTC to take an honest look at a single case of fraud on massive scale, above that which touted in this alleged action. In the mean time, it has been going on for many years and continues to this day. So, Congratulations FTC!

    Comment by Danielle Von Tungeln — October 11, 2007 @ 5:12 pm

  2. While this issue has log plagued our industry, and the fact that I have been communicating hard to Congressional leaders as well as those in the Senate and House about this very issue, I applaud the FTC for at least taking a jab at the violators.

    That said, let’s take it a step further and announce whom those violators are. The American public is under attack from slick marketing and advertising and is especially naive to the ads related to home finance. This is not about an ad to buy a TV, a new brand of coffee or a new car. It’s about the biggest purchase in a person’s life! Identify those who violate and let the consumer then be the judge! Enforce the penalties and then we will see how fast the ads change.

    Comment by Joe Adamaitis — October 16, 2007 @ 8:25 am

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