Charles Davis reports from the US, where, in the wake of
the subprime mortgage fiasco, marketing is playing a significant
part in the way banks and other financial institutions talk to
weary US consumers. Overall, the marketing tone has largely changed
to a more sober, straightforward one.

The high-profile US mortgage flameout will generate dozens of
winners and losers in the US banking world (see Closing down sale), and banks heavy in
the mortgage game are scrambling to distance themselves from the
damage. Others sense a competitive moment worth seizing, and are
tweaking their marketing message to make it abundantly clear that
they have no subprime worries.

The message from those banks untouched by the crisis is simple, yet
effective: because they played by the rules and stuck by their
lending standards in the great frenzy of home lending, they can
keep making loans today.

Massachusetts-based Enterprise Bank, for instance, recently ran
recent newspaper ads featuring an open letter citing “banks and
mortgage companies that engaged in lending that provided short-term
gratification at the expense of long-term soundness”.

Richard Main, Enterprise’s president, said: “The big national
lenders are not going to get all the business any longer, because
people are concerned, and they will look locally first. It was a
commodity, but now price is no longer the only factor.”

Sober and straightforward

The big players in the US mortgage game are now changing the
marketing message as quickly as possible. The ‘When banks compete,
you win’ ads that leading online mortgage broker
ran seemingly during every commercial break on network television
have gone, for instance, replaced with sober, straightforward ads
that seek to educate consumers about smart borrowing.

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Allison Vail, a LendingTree spokesperson, said that the online
mortgage site decided to recognise publicly what is going on in the
marketplace. “It’s not a good time for a lot of people to borrow,
and for others, it’s just a time of heightened concern,” she said.
“We felt it was important to recognise publicly that it’s not the
best time for everybody to be shopping for a mortgage, and to put
tools in front of the shopper to help them think through the

LendingTree had market research done as the subprime fallout began,
and discovered some alarming statistics, Vail said. Some 80 percent
of US consumers believe the mortgage market is “unstable or in
crisis”, and 46 percent felt that even if they had excellent or
good credit they would be unable to get a mortgage loan.
Fifty-seven percent believed it is a bad time for any borrower to
get a home loan.

LendingTree used its agency, Mullen, a subsidiary of Interpublic,
to drop the ‘When banks compete, you win’ spots in favour of a
campaign based on fiscal responsibility extending from print and
television to the company’s website and the video-sharing website
YouTube. The ads take an educational tack, centred on what are
described as ‘Five steps for smart borrowing’.

In the most downloaded YouTube video in the series, LendingTree’s
new CEO, CD Davies, addresses the mortgage market and its problems,
telling would-be mortgage shoppers that “the landscape for lending
has changed considerably”.

Davies also appears in the TV spot, speaking frankly about the
mortgage market and urging consumers to tread carefully in home
shopping these days. It’s an effective ad, if only because it is so
unusual to see a retail banker urging would-be customers to use
caution in shopping for the company’s product.

Blamed on deceptive advertising

According to a recent warning sent to mortgage
brokers and lenders, as well as media outlets carrying mortgage
advertisements, the Federal Trade Commission (FTC) said the
subprime meltdown can be blamed, in part, on deceptive advertising
from US financial institutions. Warning letters were sent to more
than 200 advertisers and media outlets, the FTC said in a

“Many mortgage advertisers are making potentially deceptive claims
about incredibly low rates and payments, without telling consumers
the whole story,” said Lydia Parnes, director of the FTC’s Bureau
of Consumer Protection. For example, some ads touted rates as low
as 1 percent without saying that they applied only during the
loan’s initial period.

Questions of whether lenders inappropriately pushed mortgages onto
subprime borrowers – those with poor credit histories – are at the
heart of the turmoil in the market. The FTC said it had warned
advertisers and media outlets that ads might violate the Truth in
Lending Act, a consumer protection law enforced by the agency and
the Federal Reserve.

The law applies to consumer loans for $25,000 or less unless they
involve real property or a dwelling. It also applies to credit
cards and home equity lines of credit. The FTC said the agency had
brought 21 enforcement actions against companies in the mortgage
lending industry over the past decade, focusing mainly on the
subprime market.

With lawmakers and regulators debating whether the federal
government should oversee independent mortgage brokers and lenders,
the ad messages that gave rise to the subprime stampede might be
the focus of regulators in the months to come, as Washington sifts
through the wreckage.