MLO Mentor is an ongoing series covering compliance best practices for mortgage loan originators (MLOs). This article outlines the rules and violations of the Mortgage Acts and Practices — Advertising rule, otherwise known as MAP-Ad or Regulation N. Enroll in firsttuesday’s 8-Hour NMLS CE to renew your California MLO license and learn more about fraud and abuse prevention in your practice.

Standards of conduct governing mortgage-related advertisements are established by the Mortgage Acts and Practices — Advertising rule, known as Regulation N. Regulation N was established in 2009 to protect consumers from deceptive claims in mortgage advertisements. The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) share responsibility for enforcing Regulation N and reviewing mortgage advertisements for violations.

Who does the law protect?

Regulation N was created to protect consumers of mortgage credit products. The law is designed to protect all individuals who are solicited by or conducting business with:

  • mortgage brokers or lenders;
  • real estate agents;
  • home builders; and
  • lead generators offering any type of mortgage credit product. [12 Code of Federal Regulations §§1014.2-3]

mortgage credit product is credit secured by a dwelling and used for personal, family or household purposes. [12 CFR §1014.2]

In the context of Regulation N, a dwelling is a one-to-four unit residential property. Dwellings include individual condominium units, cooperative units, mobile homes, manufactured homes and trailers.  [12 CFR §1014.2]

Collecting or attempting to collect a waiver of the protections under Regulation N from a consumer is unlawful. [12 CFR §1014.4]

Note that there is no minimum threshold requirement for Regulation N to apply. Any advertisement of a mortgage credit product from any of the above entities is subject to Regulation N.

Regulated forms of communication and media

 Regulation N applies to virtually all forms of mortgage-related advertisements, called commercial communications.  All written or spoken declarations, visual creations, artwork or depictions, regardless of language, are commercial communications, including:

  • labels, packages and package inserts;
  • radio, television, cable television, films and infomercials;
  • newspapers, magazines and catalogues;
  • brochures, pamphlets and leaflets;
  • circulars, mailers and letters;
  • book inserts, free standing inserts and point of purchase displays;
  • posters, charts, billboards, public transit cards and slides;
  • audio programs transmitted over a telephone system;
  • telemarketing scripts, on-hold scripts and upsell scripts;
  • training materials provided to telemarketing firms; and
  • the internet and cellular networks. [12 CFR §1014.2]

What qualifies as misrepresentation?

Mortgage advertisements are not required to provide exhaustive information about the loan product offered. Neither the FTC nor the CFPB have released guidelines for an “ideal” mortgage ad. However, the general prohibition is against providing selective information which misleads an applicant or consumer into believing the product is something it is not.

Inaccurate and partial-truth claims, whether overt or implied, by an individual, group, limited or general partnership, corporation or other business entity are prohibited by Regulation N. Terms, such as fees, costs, obligations and characteristics associated with the mortgage credit product must be openly provided to consumers. [12 CFR §§1014.2-3]

Interest rates and APR

Compliant advertisements will disclose to consumers the interest charged on mortgage credit products. If the advertisement discusses interest rates but does not convey the monthly interest included in the client’s payments, loan amount or total amount due, the advertisement is not in compliance. Additionally, lenders are to communicate whether the difference between the interest owed and the interest paid is added to the total amount due, i.e., whether the loan negatively amortizes. [12 CFR §1014.3(a)]

If interest rates, payments or other terms of the mortgage credit product are variable, this variability must be transparent. Lenders may not use the word “fixed” to mislead consumers. If an interest rate is advertised as “fixed,” the interest rate must be either:

  • fixed for the life of the loan; or
  • disclosed to be fixed only for an introductory period.

For example, advertising a “fixed interest rate” without clarifying the interest rate is only fixed for an introductory period is a violation of Regulation N. [12 CFR §1014.3(g)]

Likewise, an advertisement may not misrepresent the annual percentage rate (APR), simple annual rate, periodic rate or any other rate. [12 CFR §1014.3(b)]

Fees and terms

An advertisement violates Regulation N if it misrepresents:

  • the existence, nature or amount of fees or costs to the consumer associated with the mortgage credit product; or
  • the existence, cost, payment terms or other terms associated with any additional product or feature that is or may be sold along with the mortgage credit product. [12 CFR §§1014.3(c)-(d)]

For instance, an advertisement may not claim that a mortgage product has “No fees!” if the fees are simply charged and bundled into the loan amount.

Taxes and insurance

All requirements relating to taxes or insurance linked to a mortgage credit product, such as terms, amounts and payments, must be provided honestly. Advertisements are to state whether separate payment of taxes or insurance is required and the extent to which payment for taxes or insurance is included in the loan payments, loan amount or total amount due. [12 CFR §1014.3(e)]

Pre-payment penalties and payments

The consumer is entitled to an accurate explanation of any prepayment penalty in connection with the advertised mortgage credit product. Lenders must reveal the existence, nature, amount and terms of the penalty. [12 CFR §1014.3(f)]

In addition, consumers must be informed of the existence, number, amount and timing of any minimum or required payments. Misleading comparisons between any rate or payment that will be available for a duration less than the full duration of the mortgage credit product and any actual or hypothetical rate or payment is a violation of Regulation N. [12 CFR §1014.3(h); 12 CFR §1014.3(k)]

Product type

Misrepresenting a loan product as a fully amortizing loan product when it is not is a violation of Regulation N. [12 CFR §1014.3(i)]

Cash and credit availability

Advertisements may not misrepresent the receipt or amount of cash or credit available through the credit transaction. [12 CFR §1014.3(j)]

For example, an advertisement may not guarantee certain loan amounts or monthly payments without specifying the terms and qualification criteria associated with the advertised loan amount or monthly payments.

Triggering Terms

Regulation N also addresses companies that fail to disclose additional credit terms in advertisements to consumers. The use of some words or phrases in consumer mortgage advertisements trigger the need to include additional disclosures in the advertisement. Called triggering terms, these words and phrases needing disclosures include:

  • the amount or percentage of any down payment, e.g., “For as little as 3.5% down;”
  • the number of payments or period of repayment, e.g., “30-year mortgage;”
  • the amount of any payment, e.g., “$500,000 mortgage for just $1,650 per month;” or
  • the amount of any finance charge, e.g., “$50,000 mortgages, two points to the borrower.” [12 CFR §1026.24(d)(1)]

If any of the triggering terms are present in the consumer mortgage advertisement, the following disclosures need to be included in the advertisement:

  • the amount or percentage of the down payment (e.g. “10% cash required from the buyer”);
  • the number, amount and period of payments over the full term of the consumer mortgage, including any allowable balloon payment;
  • the “annual percentage rate,” using that term; and
  • whether the rate may be increased after closing. [12 CFR § 1026.24(d)(2)]

Potential for default

An advertisement may not misrepresent the chance or reasons for default under the mortgage credit product. Circumstances under which the consumer could default include:

  • nonpayment of taxes;
  • nonpayment of insurance;
  • failure to conduct maintenance; or
  • failure to meet other obligations. [12 CFR §1014.3(l)]

Benefit to the consumer

Claims that a mortgage credit product will benefit the consumer must be accurate and truthful. Commercial communications may not make unfounded statements regarding the effectiveness of the mortgage product in helping the consumer reduce, eliminate or restructure the consumer’s debt. Misrepresentations that any mortgage credit product can provide a waiver of forgiveness of the consumer’s existing debt obligations are unlawful. [12 CFR §1014.3(m)]

Advertisement source

All advertisements must identify their sponsoring party accurately and not create the impression that they belong to or are affiliated with parties or agencies with which they have no relevant association. Violations include:

  • creating a false sense of affiliation with any government entity or organization;
  • claiming the loan product provides a government benefit;
  • claiming an endorsement or sponsorship by any government or other program;
  • using formats, symbols or logos that resemble a government entity or other organization; and
  • leading consumers to believe an advertisement or other form of communication is made by or on behalf of the consumer’s current mortgage lender or servicer. [12 CFR §1014.3(n); 12 CFR §1014.3(o)]

Right to reside

Advertisements may not mislead consumers about their ability to reside in a dwelling that is the subject of a mortgage credit product. Advertisements for reverse mortgages may not misrepresent the conditions under which a consumer with a reverse mortgage can reside in dwelling, or the length of the stay in the dwelling. [12 CFR §1014.3(p)]


Advertisements that misrepresent the likelihood of a consumer’s pre-approval for a mortgage credit product or term are in violation of Regulation N. Advertisements cannot misconstrue the consumer’s ability to obtain or likelihood of obtaining any mortgage credit product or the refinancing or modification of any mortgage credit product. [12 CFR §1014.3(q); 12 CFR §1014.3(r)]

Counseling services

Advertisements cannot misrepresent the availability, nature or substance of counseling services regarding mortgage credit products or terms.  Additionally, advertisements may not misrepresent the qualifications of those offering the services or advice. [12 CFR §1014.3(s)]

For instance, an advertisement may not state that the advertiser’s “government loan housing counselors are standing by!”

Standards of recordkeeping 

All forms of commercial communication pertaining to mortgage credit products must be kept on file for 24 months.  The period begins on the last date of creation or distribution of the advertisement. [12 CFR §1014.5(a)]

Information to be kept includes:

  • copies of all commercial communications, including  sales scripts, training materials and marketing materials relating to the terms of a mortgage credit [12 CFR §1014.5(a)(1)];
  • descriptions, terms and names of the mortgage credit products available to clients at the time the advertisement was created and released [12 CFR §1014.5(a)(2)];
  • descriptions, terms and names of all additional products or services that were provided or offered, such as credit insurance and credit disability insurance, at the same time as a particular advertised mortgage credit service must also be readily available. [12 CFR §1014.5(a)(3)]

The records must follow the same format and be stored in the same place as other documents used in regular business practices. [12 CFR §1014.5(b)]

Penalties and actions by states

Violators of Regulation N are subject to civil penalties. The FTC, the CFPB and state authorities have the authority to bring actions under Regulation N.

MLOs — be sure to avoid violations of Regulation N by referencing these guidelines when creating your mortgage advertisements.