30 Jan 2019

Social Media for Business Has Many Regulatory Restrictions in Mortgage Industry

Social media tools aren’t just driving much of the business in today’s mortgage industry, they’re among the best ways to find new customers. But unlike most other sectors, financial institutions operate under strict regulations governing what lenders can say and do online.

Loan officers learning to use social media may feel like they’re walking a razor’s edge, knowing that one misstep can draw fines or sanctions. Ensuring everyone working in a business knows how social media works in the mortgage industry is essential. That business — and its leadership — can be held accountable for anything that gets posted.

In December 2013, the Federal Financial Institutions Examination Council (FFIEC) issued its first guidance to clarify social media’s status within existing regulations. It placed responsibility for managing risks on each institution and indicated social media posts should be considered marketing material.

As such, it falls under marketing restrictions written into the Real Estate Settlement Procedures Act (RESPA), the Fair Housing Act, the Truth in Lending Act, the S.A.F.E. Mortgage Licensing Act, the Unfair, Deceptive or Abusive Acts or Practices Act (UDAAP), CAN-SPAM, FDIC/NCUA membership rules and all applicable rules of the SEC, FTC and FCC.

Yikes.

That’s a ton to keep track of.

If it’s any consolation, regulators are still feeling their way through it, too.

One good rule of thumb is to avoid any social media activity suggesting payments, kickbacks, fee-splitting or anything else prohibited by RESPA’s Section 8. Violating the rules could draw $10,000 fines and even prison time. While the Consumer Financial Protection Bureau isn’t punishing institutions as often under President Donald Trump as it did under his predecessor, Section 8 is still an area that draws scrutiny.

The same regulations prohibiting misleading advertising practices also extend to social media. That includes misleading consumers about fixed rates, payments, claims, comparisons, endorsements, debt elimination and counseling. Social media posts discussing transaction payments will need to have additional disclosures, as they do in ads.

Posting general industry news — for example, home sales numbers — or such general information as listing documents required for typical applications should be safe. Routine posts celebrating a client’s closing or introducing a new member of your team shouldn’t raise red flags, as long as you focus on the person and not sale terms. Regulators discourage loan officers from discussing specific rates.

Direct your posts toward a general audience. While Facebook lets you boost posts to specific age, ethnic or demographic groups, doing so for mortgages could considered discriminatory.

The FFEIC guidance also encouraged institutions to have a risk-management program to measure, monitor and control social media risks. That includes a formal social media policy with specific posting guidelines, regular training and crisis procedures. It means ensuring ex-employees lose access to company social media accounts as soon as they depart.

Finally, institutions are required to retain documentation about every post — including who approved them. They shouldn’t rely on Facebook, Twitter or LinkedIn making their archives available. Fortunately, technology offers automatic retention tools and even ways to screen posts for compliance.

The Bottom Line:

It’s commonly understood how social media helps businesses, but ignorance of the regulatory restrictions of the mortgage industry can put an institution at risk. Learn the limitations, work within them and see your business thrive. Use the form above to get in touch with us. We’d love to hear from you!

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