The Radio Ad, the Napkin Rate Lock, and the Upfront Fee
An MLO at a licensed Oregon mortgage broker runs a Saturday radio ad: '3.125% fixed rate, guaranteed lowest rate in Oregon, no fees, call now.' The ad does not include the broker's name, NMLS ID, or an APR. The MLO also tells callers they can 'lock today' and records the lock on a handwritten note; no written lock confirmation is sent. On one application, the broker collects a $500 'application fee' before delivering any Loan Estimate and deposits it in the company's operating account. The MLO's business card says 'Oregon's #1 mortgage expert' and lists only a cellphone number. A borrower complains that the quoted 3.125% was not available and that the fee was nonrefundable.
1. Identify the advertising and disclosure violations in the radio ad and business card.
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The ad uses a specific rate without the required APR and omits the licensed company name and NMLS identifier, which Oregon advertising rules and federal mortgage advertising rules expect consumers to see. 'Guaranteed lowest rate in Oregon' and 'no fees' are absolute claims that must be substantiated and are misleading if the borrower later receives a higher rate or pays fees. A triggering rate also requires clear and conspicuous additional disclosures, such as APR and terms. The business card's 'Oregon's #1 mortgage expert' is an unsupported superiority claim, and listing only a cellphone number without the company name or license identifier impairs consumer verification. The MLO should pull the ad, correct the script, add the required identifiers and APR, remove unsubstantiated claims, and retain copies of corrected advertising with the approval record.
2. What is wrong with the rate lock and the $500 application fee?
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A rate lock is a material term. Recording it on a handwritten note without a written confirmation creates a dispute about the rate, period, points, and whether the lock was actually binding. The borrower should receive a written lock agreement or confirmation stating the rate, lock period, expiration, costs, and conditions. The $500 application fee is also problematic if collected before the Loan Estimate is delivered; federal TRID rules restrict fees before the LE except for a bona fide credit report fee, and Oregon examiners will look at whether the fee was disclosed and earned. Depositing it in operating funds without a clear accounting makes refunds harder. The broker should issue a corrected written lock where possible, refund unearned fees, and document the fee policy so no fee is collected before required disclosures.
3. What records and corrective actions should the broker maintain?
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The broker should retain the ad script and recording, the business card, the rate-lock note and any corrected written confirmation, the Loan Estimate timing records, the fee receipt and refund documentation, and the borrower complaint file. Oregon recordkeeping requirements exist so the regulator can reconstruct what the consumer was told and when. Corrective action includes retraining the MLO on trigger terms, license identifiers, rate-lock documentation, and fee timing; reviewing the last several months of advertising and locks; and implementing a pre-approval checklist for ads and lock confirmations. If the borrower was misled, the broker should make the borrower whole where appropriate and document the remediation. The compliance officer should not rely on the MLO's assurance that 'callers understand' the ad.