FAQs
Question: We include the Equal Housing Lender logo and legend on our website pages that promote home loan products. We also post on Twitter and Facebook about our home loan offerings but do not include the logo on these posts because typically we provide a link to our website page that contains the EHL logo. Does this comply with the Fair Housing Act’s requirements?
Answer: No, it would not. The Twitter and Facebook posts are considered separate advertisements. As a result, if the post mentions the bank’s home loan offerings, the EHL logo and legend should be included on the post itself.
Question: Our mortgage loan department wants to advertise the fact we offer temporary interest rate buydowns. Are there any special advertising rules for buydowns?
Answer: Yes — there may be additional disclosures required for an advertisement related to an interest rate buydown. The commentary to §1026.24(c) — the rules related to advertising a rate of finance charge — provide special instructions for creditors wishing to promote the availability of interest rate buydowns. See comment No. 3:
24(c) Advertisement of Rate of Finance Charge 3. Buydowns. When a third party (such as a seller) or a creditor wishes to promote the availability of reduced interest rates (consumer or seller buydowns), the advertised annual percentage rate must be determined in accordance with the commentary to §1026.17(c) regarding the basis of transactional disclosures for buydowns. The seller or creditor may advertise the reduced simple interest rate, provided the advertisement shows the limited term to which the reduced rate applies and states the simple interest rate applicable to the balance of the term. The advertisement may also show the effect of the buydown agreement on the payment schedule for the buydown period, but this will trigger the additional disclosures under §1026.24(d)(2).
There’s lots to unpack in that three sentence paragraph:
- First, if you want to advertise the loan’s APR or a rate of interest, you must calculate the rate according to the instructions in §1026.17(c). This section of Regulation Z explains how to disclose buydowns and when buydowns impact Regulation Z disclosures such as the APR, total of payments, finance charge, TIP rate and more. In a nutshell, if the buydown is NOT reflected in the note terms, but rather is a separate agreement between the borrower and third party, all of the required disclosures, including the APR and finance charge calculation, must be based on the actual note terms. So the advertised APR must reflect the note terms, not the buydown rate. The December 2022 Disclosure included an article on this topic.
- Second, this comment indicates the advertisement can reflect the simple interest rate reflecting the buydown, however, the advertisement must clearly detail the length of time the buydown rate is in effect and the simple interest rate applicable to the remainder of the loan term. So for example, if the bank was offering a 15- year loan with a 2% buydown the first year of the loan and the note rate was 6%, the advertisement could indicate the rate the first 12 months was 4% and that the rate for the remaining 168 months is 6%.
- Finally, if the ad reflects the effect of the buydown (the lower payment), then the creditor must also detail the loan’s repayment terms (number of payments, payment amount and payment frequency) as well as the loan’s APR.
Also keep in mind, Regulation Z has additional disclosure requirements if an advertisement for credit secured by a dwelling states a simple annual rate of interest and more than one simple annual rate of interest will apply over the term of the advertised loan or a payment or if the ad states a payment amount. (See §1026.24(f))
So, as you can see, advertising an interest rate buydown can get complicated pretty quickly if the ad includes details such as the buydown rate or payment. However, if the ad just promotes availability of the product, such as “Ask us how you can save on your monthly payment with our interest rate buydown program,” additional disclosures are not required.