Kristin Gabriel asked:


Confusion among homeowners due to ineffective and complex mortgage disclosures resulted in a study by the Federal Trade Commission in which 800 percent of mortgage customers were given disclosure forms for an abstract loan. The message is loud and clear there is a need for easy to read and comprehensive mortgage terminology.

A Los Angeles Times article written on June 14th describes how most borrowers are perplexed by the complexity of mortgages. Kristof shows how most borrowers are perplexed by the complexity of mortgages due to an unsuccessful explaining of costs and the risks of home loans as well as a lack in the understanding of the terminology.

In a press release issued May 7, 2007 by the U.S. Department of Justice and the Federal Trade Commission (FTC) the purpose of the joint report, “Competition in the Real Estate Brokerage Industry,” is to inform consumers and others involved in the industry about important competition issues involving residential real estate, including the impact of the Internet, the competitive structure of the real estate brokerage industry, and obstacles to a more competitive environment.

In a complicated world that demands constant attention and offers an array of choices, the fact is, consumers prefer less choices and simplicity. A number of details lead to complexity and this can overwhelm consumers. It is all too common; the more choices we have the more we struggle to choose.

Have you ever heard of anybody complaining about the bundling of gas prices? What you don’t see is that the local state and federal government each gets one third or 33 percent of money in taxes, while the oil companies get ten percent and gas stations get five percent. As far as gas prices, where does the money go? Nobody cares.

Itemization of many of the details in mortgage disclosure documents often confuse people. Perhaps, a bigger problem is the deceptive tactics often used by the mortgage lenders to sell home loans to consumers as shown in the study.

Deception is also more of a problem than just confusion. New companies will resolve the confusion, including services where real estate agents and lending professionals can facilitate approval and processing of loans for customers faster.

Consumers should look for companies like this that provide a clear diagram of the program class loan amount, total down payment and closing costs, monthly payments, loan rate, APR, commission, and agent yield. Borrowers can identify the loan amount, the upfront cost of the loan, penalty amounts, the annual percentage rate, the amount of cash due at closing or the monthly payment, and if the payment included charges for property taxes and insurance.



JOHNATHAN

Kristin Abouelata – Home Loans asked:


If you’ve ever applied for a mortgage, particularly since credit guidelines have tightened in the past few months, you know that the amount of information you must divulge to your lender could sink you financially if it were to get into the wrong hands. That’s really kind of scary when you ponder it a bit. I mean, after all, they have your social security number, your birth date, your bank account numbers, and a hair sample (just kidding on the last one). But, really. How do you know that you’re protected?

The Gramm-Leach-Bliley (GLB) Act requires companies defined under the law as “financial institutions” to ensure confidentiality and security of your personal information. Which includes mortgage lenders. In addition as part of this act, the Federal Trade Commission (FTC) issued the Safeguards Rule, which mandates measures to keep customer information safe.

So, if you apply for a mortgage and you’re concerned, your lender should be able to provide you with a written security plan that describes their program to protect you. The plan’s appropriateness should vary in relation to the company’s size and complexity, and the nature and scope of its activities. You wouldn’t expect a company with 20 employees to have the same guidelines as a company with 2000 employees. But there will be some similarities.

The written plan should outline that all staff be trained and informed of the policies. That’s important. How good is a plan if no one knows how to implement it? Typically, a lender should have several methods to detect identity theft apart from suspicious documentation or squirrelly applicants. Most use third party sources to verify a customer’s identity beyond driver’s license or government issued identification. These are background search programs with weird names like Lexis Nexus and Interthinx. And they work.

The company’s policy should require employees to change their various passwords regularly and have good security systems in place to prevent “hackers” from accessing your information. We hear time and time again the horror stories of hackers and their nasty activities. Furthermore, the company should shred documents and lock away files at night. Who wants their W-2 showing up in a company’s dumpster? Who wants the nosy cleaning crew thumbing through their file? Not me. Not anyone.

Furthermore, the staff needs to be educated as to how to detect fraudulent documentation or suspicious activity. And they need to understand they shouldn’t discuss your information with any other employees that don’t need access to your file, nor should they discuss your profile with the spousal unit at home. It’s kind of like being a doctor. They can’t discuss patient’s medical records. A lender can’t discuss your financial records.

And what happens if a lender suspects a borrower has been the victim of, or even creepier, is committing identity theft? The lender should have clear guidelines as to how the individual discovering the discrepancy should handle the “red flag.” After all, when the red flag arises, how does the lender know if she’s talking to a victim or a perpetrator at the time of discovery? So, it has to be handled correctly. And the lender’s employees need to have a clear understanding as to exactly how to handle these situations.

So, when you apply for a loan, find out upfront if you’re being protected properly. You’ve got enough to contend with these days when obtaining a mortgage. You deserve a lender who complies with these regulations and acts. We all deserve this protection. 



EMMANUEL