We are rolling a consumer mortgage loan with a fixed rate for 8 years that balloons (and will be refinanced with a new promissory note). If we are only saying "rates as low as 4.02% APR", and have member FDIC and EHL logo...are there any other triggers? I do not see any, except for the FTC saying that the balloon should not be hidden, but do we have to say there is one?

UDAAP??

Are you asking about an ad for a product to be rolled out, or about a specific loan? I wasn't sure if by rolled you might mean being rolled over (renewed).

If you mention the 8 year term, that is a trigger for the additional advertising disclosures. Judging the compliance of an advertisement on a general description is difficult without seeing the copy.

Sorry, this is a new product. They want to do flyers and send a letter to real estate agents.

We say:

-we have a special mortgage lending program
-we offering an in-house mortgage program with rates as low as 3.94% APR.
-Since all the decisions are made right here we can provide fast closing times
-come see us for low rates with fast closings to help jump start the residential housing market.

The loans will be 8 year balloons, with a new loan rate negotiated at maturity.

From Reg Z 1026.24

(d) Advertisement of terms that require additional disclosures. (1) Triggering terms. If any of the following terms is set forth in an advertisement, the advertisement shall meet the requirements of paragraph (d)(2) of this section:

(i) The amount or percentage of any downpayment.

(ii) The number of payments or period of repayment.

(iii) The amount of any payment.

(iv) The amount of any finance charge.

(2) Additional terms. An advertisement stating any of the terms in paragraph (d)(1) of this section shall state the following terms, as applicable (an example of one or more typical extensions of credit with a statement of all the terms applicable to each may be used):

(i) The amount or percentage of the downpayment.

(ii) The terms of repayment, which reflect the repayment obligations over the full term of the loan, including any balloon payment.

(iii) The “annual percentage rate,” using that term, and, if the rate may be increased after consummation, that fact.

Does just stating the APR fall under "d(1)iv) The amount of any finance charge"? If not, I feel I avoided the additional terms required under d(2).

Thanks for the help, I am confusing myself with this.

No, the APR is not a trigger term for closed-end credit. (It is for open-end credit, including HELOCS, however.) The trigger term in the information you posted above is the "8 year" maturity.

The letters to RE agents are not advertisements UNLESS the agents pass them on to home buyers.

OK, I included "The loans will be 8 year balloons, with a new loan rate negotiated at maturity." for information purposes only in the post, it is not part of the letter. So I think I am ok even with a flyer, if i add the member fdic and EHL logos.

Sorry to keep this going, but why is it not considered an advertisement? because the recipient would not actually be a potential applicant?

I am thinking about firming up some language in the letter to tell the agents "to pass the enclosed business cards to any clients that they feel may be interested in our program." to ensure that the letters are not distributed further by the agent.

The flyer is an advertisement, but if it includes no trigger terms, then Reg. Z requires no expanded information. The letter is business-to-business, so Reg. Z doesn't apply unless the agents turn around and hand copies of your letters to consumers.

thank you Richard!! I really appreciate the help!!!!!!!

Been to more than one Parade of Homes or open houses and what do I see sitting there? Photocopies of these sheets from banks, including our own. IMO, these should always be treated as advertisements that you assume the realtor will turn around and hand right to a customer. Why wouldn't you want them to have something they can hand to their customer?

my concern with the flyer and this whole product is UDAP/UDAAP... we know it is a balloon, but we are not saying it it... any thoughts on that?

just stating the APR on a closed-end loan does not trigger the requirement to give details or example of loan amount with down payment details, payment, term, etc...

Same product, now we want to go with an advertisement and brochure....is the balloon payment required to be disclosed, and language stating it will not pay off loan, will need to paid off, renewed or house sold, etc. I cannot find any guidance, and I am confusing myself

I can't help with changes to the advertising rules during the past several years, but Reg. Z always required closed-end ads to include a full payment schedule when you hit a trigger term.

If you state the 8 year term...

If advertisement states:1. Amount or percentage of any down payment (for a credit sales transaction);
2. Number of payments or period of repayment;
3. The amount of any payment; or
4. Amount of any finance charge.
Then Ad Must Include:
1. The total down payment required, shown as a dollar amount or percentage;
2. The repayment terms:
a. Number and timing of payments; and amount of payments, including final “balloon” payment that may be necessary to repay the
debt (for example “60 monthly payments of $455.40”);
3. The “annual percentage rate” or “APR” and the fact the rate may increase (if applicable).