Because buying a home is one of the most significant investments most people will make in their lifetime, it’s important to hire a mortgage lender that is trustworthy. Many people don’t easily qualify for conventional “A paper loans” due to credit problems, low income, self employment or sketchy employment history. Consequently, sub-prime, non-prime or “bad credit”mortgages have gained widespread popularity.
Although some non-prime lenders try to help borrowers finance a home with reasonable rates and terms, there are others with little regard for the borrower, concerned only with their profit. Unfortunately, consumers with credit issues are susceptible to high interest rates and additional fees. Because of this, choosing the right lender is extremely important. It’s in the borrower’s best interest “not” to put blind trust in a lender and to always keep both eyes open for deceiful lending practices.
Researching Mortage Lenders
One of the most important steps that consumers need to make in the loan process is checking out any lenders they’re considering using. Although not all sub-prime lenders are snakes, consumers must pursue a non-prime loan in the defense mode with their guard up. Shady mortgage lenders prey on first time home buyers that are unfamiliar with the home loan turf. The scenario is absolutely perfect for taking advantage of unsuspecting neophytes.
Consumers must become educated in how sub-prime loans work. There needs to be recognition of common lender traps, such as inflated interest rates, extended prepay penalties (usually mandatory), additional fees and clauses prohibiting refinancing and binding manditory arbitration (BMA) - barred from going to court. Truth of the matter is, there are many lenders ready and willing to rip consumers off and even commit mortgage fraud to earn a quick buck. Unfortunately, it’s standard operating procedure and folks must be savvy enough to recognize it.
When To Walk Away
Recognizing early warning signs of abusive lending practices is key. Lenders should provide the borrower with a “Good Faith Estimate (GFE).” This is an estimate of the closing costs, which include inspection costs, taxes and title insurance. By law, the borrower should receive a GFE within 3 days of the loan application. It’s important that consumers walk away from any lender that stalls on providing a Good Faith Estimate on request. The lender is also required to provide an annual percentage rate, which is the cost of the credit in relation to the amount borrowed. This provides the borrower witn a means to compare offers with other lenders.
RESPA
The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, designed to to help consumers become better shoppers for settlement services and to make sure that borrowers receive disclosures at various times. Some disclosures spell out the costs associated with the settlement, outline lender servicing and escrow account practices and describe business relationships between settlement service providers.
Truth in Lending Act (TILA)
The Consumer Credit Protection Act of 1968 initiated Truth in Lending disclosures. For the first time creditors were required to disclose the cost of borrowing in layman’s terms so the average consumer could understand what the charges are, compare costs, and shop for the best terms and deal.
Reporting Predatory Lending
Consumers who feel they are being victimized by abusive lending practices should make a formal complaint to the following federal agencies and organizations:
* FDIC Consumer Response Center
* Housing and Urban Development (HUD)
* U.S. Department of Justice
* Federal Bureau of Investigation (FBI)
* Federal Trade Commission (FTC)
* National Consumers League (NCL)
* National Fair Housing Alliance (NFHA)
* National Association of Attorneys General
* Center for Responsible Lending
* Association of Community Organizations for Reform Now (ACORN)
* Consumer Federation of America (CFA)
Because lending abuse is on the rise in the sub-prime loan industry, consumers must enter into the mortgage loan process with the ability to recognize shady practices and walk away if necessary.
For information and tips on mortgages, visit the “professionals” at New Homes Central Lending.
http://www.homesadvisory.com/sub-prime-mortgage-lenders-should-they-be-trusted.html
