Sale and rent back is not always the best option, the OFT says.
Companies offering sale and rent back deals to struggling homeowners have been told by the Office of Fair Trading to back-up claims they make in adverts.
Under these deals, people struggling to pay their mortgages sell their homes at a discount to firms who then let them stay on in the property as tenants.
Last year, an OFT report found this might not be the best option and some people had been quickly evicted.
Now it has ordered 16 firms to substantiate the claims they have made.
If it finds "unfair and misleading" practices, the OFT may then take action - which could include prosecution.
'Clear and transparent'
The OFT said the advertisements under investigation typically included suggestions that customers could stay in properties after they were sold, by renting them back for as long as they wished, at fair market rates.
Clients were also told that they could buy back properties at an agreed point in the future, and in the meantime would have flexible rental terms with periods of low rent.
"Sale and rent back companies must be clear and transparent about the services they offer and the security consumers have as tenants," said Heather Clayton, the senior director of consumer protection at the OFT.
"Clarity of advertisements is particularly important in the sale and rent back sector where customers may be under stress from financial difficulties, at risk of losing their homes and making important and complicated decisions."
The OFT report, released in October, called on the 1,000-plus firms involved in the business to be more transparent.
An unknown number of amateur landlords are also involved in the relatively new industry.
The OFT said that about 50,000 transactions of this kind have already taken place, and expressed concern that "sale and rent back deals have potential to cause serious and permanent harm to often vulnerable homeowners".
Consumer groups have called for regulation of these schemes, also known as mortgage rescues.
Advertisements often target those facing repossession.
The Council of Mortgage Lenders predicts that there could be 500,000 repossessions in the UK in 2009, up from about 210,000 last year.
Last year's OFT study suggested there were better options for some of these people.
Its findings included:
- misleading details, with some tenancies only guaranteed for six to 12 months, although residents believed they could stay in their homes for years
- some landlords raising the rent substantially and quickly evicting tenants who struggle to pay
- former homeowners losing their homes anyway after becoming tenants, because the new landlord had defaulted on the mortgage and the property had been repossessed.
The National Landlords Association (NLA) has said that there is a place for the ethical use of sale and rent back schemes in the housing market, and said it wanted to see a code of practice in place.
Meanwhile, the Council of Mortgage Lenders and Citizens Advice have called for the swift implementation of regulation in the sector.