Mortgage Lowdown

– Pushpa Sathish, Staff Writer

Consumer protection from fraudulent lending practices just got a boost with a new bill that proposes that loan officers, mortgage brokers and retail lenders not lend clients more than they can afford to pay back or more than their house is worth. Advocated and promoted by Rep. Barney Frank, the new chairman of the House Financial Services Committee, the bill will receive top priority to enable it to become a law that regulates lending standards across the country. The House Financial Services Committee is the primary originator of banking and mortgage-related federal legislation.

Consumers not well-versed with the way the mortgage industry works usually borrow beyond their means and end up deep in debt. One of five sub-prime borrowers who opted for reduced-payment, low-documentation mortgages between 1998 and 2006 are in danger of losing the roof over their heads because of sharp increases in payment and penalties, according to a survey by the Center for Responsible Lending.

What does the mortgage industry think of this proposed law? Steve O’Connor, senior vice president for the Mortgage Bankers’ Association, feels that a federally imposed suitability standard would be “vague and subjective,” and not allow the borrower to be in control of the transaction. Roy DeLoach, executive vice president of the National Association of Mortgage Brokers, echoes O’Connor’s sentiments and adds that a suitability test “could lead to accusations of discrimination.” 

Anybody who wants to have a home of his/her own knows the importance of maintaining a good credit score. For this you need to pay your bills on time, have a low debt to income ratio, etc. I know all this is easier said than done and bankruptcy is not something you will on yourself. A huge combination of factors is responsible for a person going bankrupt.

But can you give up the dream of a home just because you’ve gone bankrupt? So, if you’ve filed for bankruptcy, how does it affect your chances of getting a reasonable mortgage loan? There are several lenders who are eager to offer home mortgages to individuals with bad credit. These mortgages have a higher interest rate, which increases the monthly payment. Another question that needs answering is how long should you wait before you can buy a home? Obtaining a home after filing for bankruptcy is feasible; nonetheless, individuals who have filed must adhere to specific stipulations. To obtain a mortgage after filing a chapter 7 or chapter 13, you must wait at least two years after the bankruptcy is discharged.

A home to call your own — a dream that just about every American has. So, if you cannot qualify for a mortgage, it is painful. The problem is that people are today willing to do anything that will help them get that coveted loan. Targeting people who badly want a home is a growing industry of unscrupulous people who offer to ‘repair’ your credit scores for a fee. This controversial service has managed to transform a common white lie in the real-estate industry into a full-fledged business, and in the process, has worsened the situation for many people who are already deep in debt.

In Ohio, a growing number of people are turning to them and feeling ripped off. Complaints to the attorney general about credit-repair companies have been on the rise, records show.

A U.S. appeals court in San Francisco recently ruled that California might force Quicken Loans Inc. to provide refunds to customers under a state law that limited when it could begin charging interest on mortgages. The decision may cost Quicken, the largest Web-based direct mortgage lender, millions of dollars. Reuters.com reports:

Quicken Chairman Dan Gilbert said in an interview that his company may appeal to the U.S. Supreme Court, or lobby California Republican Gov. Arnold Schwarzenegger and the Democrat-controlled legislature to change state lending law retroactively.

Read more: Quicken Loans may face mortgage interest refunds