Pennsylvania Banking Dept. Warns Mortgage Brokers on Using Misleading Direct Mail Solicitations

HARRISBURG, Pa. – Attention first and second mortgage loan brokers in Pennsylvania: the state Department of Banking has put you on notice concerning the use of misleading or deceptive direct mail solicitations that use the name of other mortgage companies or lenders. In her letter to mortgage brokers, Cynthia Wirt, director, Bureau of Licensing, Compliance and Consumer Services, wrote that the Department is aware that some mortgage brokers “are soliciting the current mortgage loan customers of mortgage lenders by direct mail solicitation using the names of the current mortgage lenders in such a way that consumers are led to believe that the solicitation has been sent by their current mortgage lender or that their current mortgage lender has shared the customer’s private financial information with another entity.” She emphasized that the Department “strongly disapproves of this practice and considers it grounds for stern regulatory action.” Wirt made it clear that, “the Department does not object to truthful advertisements that are based on lawfully obtained information.However, there is no excuse for misleading or deceptive advertising.” Secretary of Banking William Schenck said the Department became aware of the situation through calls it received from several area banks that complained about the practice. In addition, said Schenck, some members of the Department staff also received the solicitations in the mail. “I’m sure many banks and other financial institutions in the state have working relationships with mortgage brokers and telemarketers, but we’re not talking about those sorts of relationships,” said the Secretary of Banking. Mortgage lenders and brokers are responsible for their advertisements and solicitations and any advertisements, including direct mail and telemarketing calls that mislead or deceive consumers, are unacceptable, he said. Schenck said he didn’t doubt that the illegal practice has been going on “for some time” in Pennsylvania, “but at this time given the volume of refinances, it’s become tempting for some mortgage brokers to do it more as one way to keep the income going.” Schenck emphasized “the Department has the authority under law to take action against anyone who violates the law,” including fines or withdrawing mortgage broker licenses. When asked, at press time, if the Department had fined or revoked any mortgage brokers’ license yet, Schenck said he had had “specific discussions with some mortgage brokers on the subject.” He added that he’d also already “interfaced” with several telemarketers that had been hired by mortgage brokers. According to Department of Banking spokesman Paul Wentzel Jr., there were in Pennsylvania as of July: 2,176 first mortgage brokers with 431 branch offices; 1,553 second mortgage brokers with 442 branch offices; 107 loan correspondents – mortgage brokers who can close mortgages in their own name – with 29 branch offices; 290 limited mortgage brokers who only handle refinances; and 197 second mortgage brokers agents. Schenck stressed that he’s “confident” the misleading solicitations are only being perpetrated by a limited group of mortgage brokers in the state, and “they do not reflect the entire industry.” Mike Wishnow, vp of communications and marketing for Pennsylvania Credit Union Association said no one at PACUA had received complaints from any credit unions concerning the “inappropriate” use of a credit union’s name for misleading solicitations0, “but that doesn’t necessarily mean it hasn’t happened,” he said. The state Department of Banking urged anyone who has received what they believe is a misleading or deceptive mortgage loan solicitation by mail or through a telemarketer to contact the Department at (800) 722-2657 or through the Department’s Web site, www.banking.state.pa.us. -