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Confusing Home Loans and Mortgage Lender Disclosures
by Kristen Gabriel
Confusion among homeowners due to ineffective and complex mortgage disclosures resulted in a study by the Federal Trade Commission in which 80% 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.
The study described in an article from Los Angeles Times on June 14, 2006 by Kathy M. 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 do not see is that the local state and federal government each gets one third or 33% of money in taxes, while the oil companies get ten percent and gas stations get five percent. But no one seems to care where the money goes.
For the same reason, an itemization of all the details concerning mortgages can deter consumers from understanding mortgage's disclosures. 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.
So, the issue here is not just the confusion of terms but also deception. 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.