Mortgage Lender Overcharging On The Rise
In 2004 The National Mortgage Complaint Center completed
a year long national survey of mortgage lenders to determine national fee
standards and or fee averages for homeowners about to refinance/finance, and
the results were grim. Rather than finding a competitive market, the survey
discovered widespread fraud, cheating and or bilking of the citizens about to
refinance or purchase a home. Because these results were so troublesome, the
National Mortgage Complaint Center revisited the previously surveyed lenders
and their just completed mortgage transactions in 2005 to see if the situation
had improved for the consumer. It had not. In fact, because there are so many
new mortgage lenders and so many fewer refinances, it was discovered that many
to most lenders had increased fees to borrowers and or not explained to the
borrower that their interest rate had been raised over what was deserved, so
that the lender/broker could receive a kickback called a yield spread premium
for increasing the borrowers rate. A typical yield spread would be a point (one
percent of the loan amount) for every quarter point interest rate increase the
lender/broker was able to get the borrower to agree to (knowingly or
unknowingly). On an average $200,000 mortgage as an example, a quarter point
interest rate increase over the best rate for the borrower might net the broker
and extra $2000. A half point increase in the rate might translate into a $4000
kickback to the broker/lender.”
”As a result of this newest information, the National
Mortgage Complaint Center will begin offering a nationwide mortgage document
examination and audit service for homeowners about to refinance or for home
purchasers about to purchase a home, in the hopes of stopping lenders from
taking advantage of unsuspecting borrowers. The National Mortgage Complaint
Center will team up with honest real estate firms and or property management
firms to offer this service in every state. It is felt by standing guard over
the real estate firm’s client, the real estate firm makes a life long friend by
protecting the homeowner from being overcharged or defrauded by a greedy
mortgage lender.”
Read the rest of the release here.
I hadn’t heard of this organization before but it seems
like a valid consumer service. The
Center is part of The Justice & Integrity Project which has also released
recent reports on Nursing Home abuse and corporate wrongdoing.
Especially interesting is the pre-closing review they are
going to be offering. I was a little
suspicious until I saw on their web site that they only charge $35 for the
document review. And I especially like
the report author’s comments: “According to Martin,”homeowners should not
expect much help from their elected state or federal officials because the
biggest contributors to state or federal legislative committees assigned to
oversight of banking or mortgage activities are in fact mortgage companies or
banks”. “It’s kind of like the fox guarding the chicken coup”. “kind of hard to
get any consumer protection from elected leaders when they have been bought off
by the very industry they are supposed to be watching”, according to Martin.”
One item of concern - their web site lists “Recommended
Brokers” and also has a lenders “Hall of Shame.” I’ll have to look into how many complaints or
compliments it takes to make the list.
One problem - Wells Fargo makes both; not sure how that makes sense.