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Great deals often have ‘fine print’
As owner of a small mortgage company for more than 15 years, I see a disturbing trend in
the mortgage business — the industry becoming more irresponsible in its business and advertising practices.
History has proven that when an industry as a whole becomes irresponsible, consumers wake up and file complaints and the government steps in and starts to regulate. While this seem like a good thing for the consumer, history has also shown that too much regulation can be harmful to everyone.
Misleading advertising and inferior service is widespread in the mortgage business. Some recent observations aren’t pretty.
m Homeowners across the country receive countless solicitation letters with misleading and false information. I have a stack full of letters that I have saved over the last year or so. Every one is misleading to some degree.
Perhaps the most outrageous letter I received boasts a 30-year fixed rate of 1.95 percent.
m I click on a mortgage advertisement on a very well known Web site. The hyperlink simply says, “Mortgage rates as low as 5.375 percent.” I go to the site and read the fine print, which is almost too small for my old eyes. It turns out the 5.375 percent is only good for six months, and the rate increases by 1 percentage point every six months thereafter.
The ad also confesses that the loan carries a 2.5 percent origination fee. That’s a pretty steep fee by industry standards.
m A recent study by the Federal Trade Commission found that nine out of 10 borrowers do not understand the charges and closing costs associated with their loans.
I’ve been helping folks with mortgages for 20 years and can say with confidence that not one client of mine has ever left my office without a full and comprehensive understanding of his loan, the terms and the charges, if any.
It’s the loan officer’s job to ensure that this happens.
The mortgage business is highly regulated as it is, but unfortunately many of the current laws don’t work very well.
Here are a couple of examples:
m The law requires that the lender issue a “truth-in-lending” statement at time of application. The form requires disclosure of the annual percentage rate (APR).
By David A. Clarke Jr.
Blame Washington's intelligence failure, not lack of police
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