No Lull In Mortgage Pitches

Here is an interesting article from New York Times.No Lull in Mortgage Pitches

By LOUISE STORY
 The mortgage market may be in a historic upheaval, but mortgage companies continue to pump out upbeat advertisements.

Countrywide Financial brags in its ads that “No one can do what Countrywide can” and that “Countrywide can show you the way home.” Wachovia ads feature an “Approved” stamp prominently at the top, and Bank of America says, “Homeownership is the best medicine.”

Also, the National Association of Realtors is running national television ads saying there has never been a better time to buy a home. Home values nearly double every 10 years, the commercial claims, showing a young couple walk up to their white colonial-style home.

Despite rising foreclosures, defaults, lawsuits and investigations by state and federal regulators, the mortgage industry has not reduced its ad spending.

Mortgage experts say spending will be strong into the spring, a prime buying time for the housing market. But consumer advocates say the ads continue to be misleading.

“There’s been huge scrutiny on these companies, but they are continuing to advertise,” said Sally Greenberg, executive director of the National Consumers League, a nonprofit organization in Washington. “Many of these companies are bleeding, and these ads are a way to get more money into the door.”

Indeed, the Mortgage Bankers Association is predicting this will be a down year for the industry, and on Friday it said that the total value of mortgages produced would be down 16 percent from its level last year.

Mortgage companies spent nearly $409 million on ads in the third quarter of last year, the most recent period with available data, higher than the industry’s ad spending during the peak of the housing boom, according to TNS Media Intelligence. Mortgage ads can easily be found in all types of media outlets, and the ads cited in this article were found by Competitrack, a company in New York that tracks advertising.

“There may be some good, legitimate offers,” said Frank Dorman, a spokesman for the Federal Trade Commission, which monitors advertising for deception. “But it’s a good time for consumers to be especially wary.”

More than 1.6 million mortgage holders missed payments in 2007, and more are expected to default this year, according to Moody’s Economy.com.

According to the Mortgage Bankers Association, the delinquency and foreclosure rate for all mortgages is 7.3 percent, higher than at any time since the group started tracking that data in 1979.

On Friday, Countrywide Financial, the nation’s largest mortgage lender, said that its foreclosures and late payments increased in January to levels nearly twice as high as a year ago. Bank of America is in the process of acquiring Countrywide.

Many mortgage ads have shifted to the Internet, where it is more difficult to monitor them. Countrywide calls itself “America’s #1 Home Loan Lender” in Internet ads, and Wachovia says now is the “perfect time” to get a jumbo — or high value — loan. As recently as Jan. 8, Ditech, a unit of GMAC, ran Internet ads telling people they could take cash out of their houses, totaling up to 95 percent of the value of their homes.

And Bank of America still says in online ads that people should refinance to “get the cash you need, when you need it.” Many people who are having problems with their mortgage payments are those who took cash out of their homes as their appraisals rose. When asked about the cash-out ad, Joe Goode, a spokesman for Bank of America, said homeowners still have considerable equity in their homes.

“Taking equity out of one’s home is still a smart way for consumers to finance things like home improvements,” he said.

On television, Countrywide is advertising its “Combo Loan,” which allows consumers to combine multiple mortgage loans with auto and credit card debt. As part of the loan, they can take cash out, too. Ditech is introducing new ads, a spokesman said, but its recent TV spots showed a magician and said, “When it comes to home loans, people don’t want smoke and mirrors.”

Some experts on debt say there is nothing wrong with the ads, as long as they are not misleading.

“They’re in the business to make mortgage loans, so all they’re doing is continuing their business,” said Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling. “But consumers need to read between the lines of everything they’re saying.”

Mortgage companies may benefit if consumers believe the Realtors association’s claim that home values nearly double every decade. When asked if the ad is irresponsibly optimistic, Stephanie Singer, a spokeswoman for the association, said the claim was based on the association’s data on existing home sales dating to 1968.

“All we’re saying is that these are the facts up to this point,” she said. “You see the same thing in the stock market and financial industries. They make claims based on long-term trends.”