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New HUD Rule Goes After Fake Mortgage Loan Letters

Did you ever wonder why you get so many letters and emails from lenders who offer low mortgage quotes and seem to be affiliated with the FHA or HUD? The answer, very simply, is that you ought to wonder. Why? Lenders are not supposed to imply or infer any endorsement from the federal government.
In the world of HUD-speak a “device” can be a letter, email, ad, or channel “soliciting, promoting or advertising FHA products or programs.”
Now, says the government, FHA-approved lenders “are strictly prohibited from displaying the official FHA Approved Lending Institution logo(s) in a location or manner within a Device that creates the false impression that the Device is an official government form, notice or document or that otherwise conveys the false impression that the Device is authored, approved, or endorsed by the Department or FHA. Furthermore, alteration or modification of the FHA Approved Lending Institution logo(s) is strictly prohibited. Non-approved mortgagees, including Third Party Originators, are prohibited from using the official FHA Approved Lending Institution logo(s) on any Device. Moreover, use of the FHA logo is strictly prohibited. No person, party, company, or firm, including FHA-approved mortgagees, may use the FHA logo.”
Translation: Those strange communications you receive which seem so “official” looking are simply tricks to unfairly gain attention from prospective borrowers, not much better than claims you’ve won a lottery or that a seductive encounter awaits your attention.
Starting in May, you’re likely to see a whole new class of messages from lenders, messages which plainly state that the missive is not authored, approved, or endorsed by HUD or the FHA.
When looking at lender letters which hint or suggest some sort of government affiliation there are some question to be asked:
First, is the sender an approved FHA lender?
Second, is the sender affiliated with your current lender? This is important because letters often contain the name of your current lender in big and bold type — but the senders actually have nothing to do with your lender.
Third, no matter how “official” are you looking at a government form or some concoction churned out by the lender’s art department?
Fourth, is there a commitment to make a loan?
Fifth, how can you get those low, low rates featured in the letter? That is, how do you qualify?
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Did you ever wonder why you get so many letters and emails from lenders who offer low mortgage quotes and seem to be affiliated with the FHA or HUD? The answer, very simply, is that you ought to wonder. Why? Lenders are not supposed to imply or infer any endorsement from the federal government.

Those strange communications which seem so “official” are simply tricks to gain attention from prospective borrowers, not much better than claims you’ve won a lottery or that a seductive encounter awaits your attention.

In the world of HUD-speak a “device” can be a letter, email, ad, or channel “soliciting, promoting or advertising FHA products or programs.”


Now, says HUD, FHA-approved lenders “are strictly prohibited from displaying the official FHA Approved Lending Institution logo(s) in a location or manner within a Device that creates the false impression that the Device is an official government form, notice or document or that otherwise conveys the false impression that the Device is authored, approved, or endorsed by the Department or FHA. Furthermore, alteration or modification of the FHA Approved Lending Institution logo(s) is strictly prohibited. Non-approved mortgagees, including Third Party Originators, are prohibited from using the official FHA Approved Lending Institution logo(s) on any Device. Moreover, use of the FHA logo is strictly prohibited. No person, party, company, or firm, including FHA-approved mortgagees, may use the FHA logo.”

Because of the new rule, starting in May you’re likely to see a whole new class of messages from lenders, messages which plainly state that the missive is not authored, approved, or endorsed by HUD or the FHA.

When looking at lender letters which hint or suggest some sort of government affiliation there are some question to be asked:

  1. Is the sender an approved FHA lender?
  2. Is the sender affiliated with your current lender? This is important because letters often contain the name of your current lender in big and bold type — but the senders actually have nothing to do with your lender.
  3. No matter how seemingly “official” are you looking at a government form or some concoction churned out by a lender’s art department?
  4. Is some sort of official sounding program mentioned? Is there actually any such program? Look up the program by name on the Internet and see if you find any government sites which explain the program in detail.
  5. How can you get those low, low rates featured in the letter? That is, how do you qualify? (Beware, in some cases you can only get the lender’s touted rate by completing your loan application on the skin of a unicorn….)
  6. Is there a minimum loan amount? How about a maximum?
  7. Are the rate mentioned in the “device” subject to change?
  8. Does the letter tout monthly payment savings? Does it also say that if you refinance with the lender it’s possible that your interest rate or overall loan costs could actually rise over the life of the loan?
  9. Does the letter include some legal-sounding jargon about interfering or obstructing the mail? Does it make the letter seem more important? Is it anything but nonsense?
  10. Does the letter make any reference to borrowers with bad credit? If you have damaged credit do you really think the lender has some magical way to offer a discounted interest rate?

Of course, when looking for a mortgage always protect your interests — shop around, speak with several lenders and get written Good Faith Estimates (GFEs).

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