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   ARTICLE   |   From Scotsman Guide Residential Edition   |   September 2014

Getting Your Compliance Ducks in a Row

Mortgage companies should be aware of pertinent rules for social media marketing

Getting Your Compliance Ducks in a Row

In today’s media-driven environment, it’s probably impossible to avoid your mortgage company’s exposure to social media. And why would you want to? Social media can be a powerful marketing tool.

Have you considered, however, your company’s liability for violating federal regulations through its use of social media? Ignorance isn’t bliss when it comes to compliance, and mortgage professionals would be wise to make sure that their companies’ social media usage is in line with industry requirements.

It’s rare to find a mortgage professional today who has not, at the very least, considered the use of social media as a way to drive sales. Although it’s commonplace that a mortgage company’s sales employees are marketing the company in various forms of social media, it’s uncommon to speak to a mortgage company’s management team that knows exactly what employees are saying about the company.

Mortgage company executives often think they are not responsible for their employees’ personal use of social media. If your employees are making representations on behalf of your company, however, your bank or brokerage can be held responsible for any misrepresentations or instances of deceptive marketing. Whether employees market on the company’s behalf or the organization’s corporate team employs social media campaigns, mortgage banks and brokerages must be mindful of complying with federal regulatory requirements when creating company-related websites and posting on mediums such as blogs, Facebook, Yelp, Twitter or LinkedIn.

The Consumer Financial Protection Bureau (CFPB) has indicated that it intends to focus supervisory efforts on the use of social media. This past December, in conjunction with other agencies, the CFPB issued consumer compliance risk-management guidance on social media through the Federal Financial Institutions Examination Council. The guidance will direct examinations of social media oversight and controls, and it outlines several consumer-protection and compliance laws that are implicated through the use of social media. For mortgage companies, these include:

  • Fair-lending regulations such as the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act
  • The Truth in Lending Act (TILA)
  • The Real Estate Settlement Procedures Act (RESPA)
  • The Fair Debt Collection Practice Act
  • Unfair, deceptive, or abusive acts or practices (UDAAP) regulations
  • Mortgage acts and practices (MAP) rules
  • The Community Reinvestment Act
  • The Gramm-Leach-Bliley Act (GLBA)

The compliance implications of each of these regulations will depend on the type of activity your company conducts through social media. Let’s review some compliance considerations implicated by social media activity.

Advertising and marketing

Mortgage companies that advertise or market on social media sites should be mindful of the content of their advertisements to avoid fair-lending, RESPA, UDAAP, TILA and MAP issues. The following are some prohibited practices in closed-end mortgage loan advertisements:

  • Misleading advertising of “fixed” rates and payments;
  • Misleading comparisons in advertisements;
  • Misrepresentations about government endorsement;
  • Misleading use of the lender’s name;
  • Misleading claims of debt elimination;
  • Misleading use of the term “counselor”; and
  • Misleading foreign-language advertisements.

Any advertisements that discuss the amount of any payment on a transaction also must include additional disclosures. These additional required disclosures — frequently in the form of credit transaction examples — should be disclosed on the same page as the advertisement that triggered the disclosure to meet TILA’s “clear and conspicuous” standard.

Mortgage companies also should monitor their social media posts to ensure that any information posted regarding potential offerings remain accurate and up-to-date to avoid misrepresentations implicating UDAAP and MAP issues. Banks and brokerages additionally should monitor individual loan-officer or branch websites to avoid misleading representations regarding a team or loan officer’s affiliation with lending institutions.

Taking applications

Mortgage companies taking online applications should implement controls to ensure that they are meeting initial disclosure-timing requirements. They also should ensure data security for consumers’ nonpublic personal information submitted through online portals, because this step is necessary in meeting GLBA consumer information safeguard requirements.

Third-party vendors

If a mortgage company takes applications through an online portal and uses a third-party vendor to operate its site, the company’s privacy policy should inform borrowers of information sharing with non-affiliated third parties. Consumers should have the opportunity to opt out of this type of information sharing. Additionally, a company utilizing a third-party vendor to host websites or social media content would need to ensure that the vendor does not data mine or collect information, which would be in violation of ECOA requirements surrounding the collection of customer information.

The key to using social media as an effective marketing tool and remaining compliant is to evaluate your use and risk tolerance for social media and develop a policy surrounding its use at your company. Do you want to allow all of your employees to use social media? Is this permission subject to prior authorization by your company’s compliance officer or management?

If your bank or brokerage does permit the use of social media, you should ensure that your policy mandates employees’ adherence to the compliance regulations associated with social media. You also should consider that your company is responsible for monitoring any authorized use of social media conducted on behalf of your company.

With that in mind, your organization may want to consider bringing all loan-officer and branch-team websites in-house, making it easier for your compliance function to control website content. To avoid risks to your organization’s reputation, you also may want to consider monitoring any unauthorized use of social media in contravention of your company policies.

•  •  •

When it comes to how mortgage companies use social media, the following basic principles apply:

  1. Establish a company-wide policy regarding permissible uses of social media;
  2. Set guidelines for the compliant use of social media; and
  3. Monitor the use of social media to ensure that policies and guidelines are adhered to.

There’s little doubt about the value originators can find in social media. Banks and brokerages must be sure, however, that this value isn’t offset by undue compliance risks. With well- considered plans and monitoring in place, your organization can be certain it’s in the clear.  


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