Over the last decade, Illinois consumers have learned the hard way that sub-prime mortgages plague homeowners and often lead to foreclosure. And foreclosures across the Chicago area have left neighborhoods with abandoned homes and lower property values. Many borrowers also learned in recent years that their mortgage servicers had committed fraud and other bad acts, and as a result certain lenders and servicers have agreed to settlements worth millions of dollars.
How can home loan borrowers avoid these life-changing headaches in the first place? According to a recent article in the New York Times, nearly 50 percent of all homeowners “fail to shop around for a mortgage lender.” Failing to shop around for the best mortgage rate doesn’t necessarily mean that you’ll become the victim of an unscrupulous lender or servicer. However, shopping around for your mortgage lender can make a difference in your financial status, the Consumer Financial Protection Bureau (CFPB) emphasizes. As such, the CFPB is taking steps to “empower consumers to be more discerning when selecting a home loan.”
New Website Tool to Aid Consumers
The CFPB worries that consumers aren’t shopping around for mortgage lenders, which means that they may not end up with the best mortgage rates. Given that many mortgages are particularly long-term loans—many of us, for instance, have 30-year mortgages—it’s important to check out all the options available to you.
In order to aid consumers, the CFPB has a new set of online tools “to help consumers better navigate the mortgage process.” What do these tools include? For example, consumers now have access to a “rate-checking tool.” When a consumer enters her credit score into the tool, along with information about her geographic location and the type of mortgage she wants, she can “see a range of interest rates local lenders are offering.”
But are interest rates really one of the most important things to consider when selecting a lender? Certain industry groups have pushed back against the CFPB’s emphasis on interest rates, emphasizing that “there are other costs associated with mortgages.” Other complaints have arisen, too. For instance, according to John Councilman, the president of the Association of Mortgage Professionals, “just because consumers report that they did not seriously consider more than one lender . . . does not necessarily mean that they were uninformed.”
Drawbacks of Consulting with Only One Lender
Based on results from a recent survey sponsored by the National Survey of Mortgage Borrowers and the Federal Housing Finance Agency, nearly 50 percent of soon-to-be homeowners only seek rates from one lender. And an even larger percentage of borrowers—nearly 80 percent—end up applying for a loan with only one lender.
While interest rates might not seem like one of the most important aspects of a mortgage, consumer advocates emphasize that they can make a big difference in the long run. Indeed, Richard Cordray, the director of the CFPB, emphasized that “the failure to look around can mean real money lost for consumers.” To be sure, “a difference of half a percentage point in the interest rate on a mortgage can add up to thousands of dollars for borrowers in just a few years.”
Do you have questions about seeking a fair home loan? Or do you have concerns that your mortgage lender or mortgage servicer hasn’t treated you fairly? Contact an experienced Oak Park consumer protection attorney today.
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