Liability of Lenders

The lender liability subject isn't new, good laws have been passed for many years, but they haven't usually been enfored much because most people don't know about them. Because millions of Americans are currently losing their homes from the Sub-Prime Mortgage meltdown, the news is finally starting to talk about Predatory Lenders. Some of those being foreclosed upon are elderly people, many of which owned their home free and clear before refinancing, many others were young first time home-buyers who were talked into borrowing more then they could actually afford, some just needed to borrow some money to do home improvements or for college or a wedding. If you look up the REO properties that lenders have foreclosed on, you see both million dollar properties and broken down old shacks. Very few people in today's society have resisted the lure of adjustable arm mortgages and the more dangerous option arm mortgages. Mortgage companies have sold these mortgages primarily because Wall Street wanted them and would pay more for them. The federal reserve waited until over half of the US had taken out adjustable rate mortgages and started raising interest rates 17 sessions in a row, which caused a disaster. When the real estate market was at its peak, you could always refinance to borrow more or sell your house and take a profit and start over. Now millions are stuck with a lower housing market and difficulties in refinancing. The market isn't going up, but homes are going down in value - depreciating.

How do lenders fit into this sad story. They started the problem by forcing loans without regards to a borrowers best interest. They didn't just bend a few rules - they threw the normal rules out the window. Anyone with a house was fair prey. They devised nice-sounding sales pitches and set up sham companies to receive kickbacks. They put together incentive plans like the YSP to get brokers to shove borrowers into higher rates. Many lenders have their own reinsurance companies, title companies, management companies, and set up multiple affliate business arrangements. Lenders often incorporate in different states and operate under more than one name, with often as many as 35 aliases. It seems OK, until you understand why they do it.

1.A lender or real estate agent likes you to use their own settlement service providers, because they get part of the money you pay for the services. Lender-ownership of Title insurance companies is under scrutiny right now.
2. When a lender wires a prepayment penalty into your mortgage he can get more from the investor.
3. When a lender incorporates, he often chooses the state to incorporate in by how he likes the laws of the state of incorporation or the laws of the state the mortgage is sold in.
4. When a lender uses several companies, those companies can hide his kickbacks, and they can hide background info, like who they really are and if they've been in trouble before. Sometime, it just to make it hard for a borrower to sue them.
5. Many lenders give the broker a commission if he gets you to agree to a higher interest rate, which will cost you lots of money over the life of the loan.

2005 Survey Lists Top Ten Ways Mortgage Lenders Overcharge Homeowners
Date : 5/17/2005 Source : News

A recently completed survey by the Justice & Integrity Project's National Mortgage Complaint Center reveals the top ten mortgage fee abuses in 2005. With interest rates at or near historic low levels, once again the refinancing boom and home sale bonanza is on. The problem: in increasing numbers, mortgage lenders and mortgage brokers are overcharging the average U.S. homeowner. While state and federal agencies proclaim there is consumer protection, there is little or no evidence to support their claim.

9 Mortgage Fee Abuses:

• 1. The Good Faith Estimate: Most borrowers don't get their Good Faith Estimate and or Truth in Lending Statement within three business days after making application to the mortgage lender/broker. Without a Good Faith Estimate or Truth In Lending Statement, the borrower has no real way of knowing what his/her interest rate will be and no way of knowing what the mortgage fees will be. These are violations of the Truth in Lending Act and Real Estate Settlement Procedures Act, and well as State Laws.
  
• 2. Prepayment Penalties: Prepayment penalties are rarely explained to the borrower in an understandable way. Prepayment penalties are required to be disclosed in the Truth in Lending Disclosure Statement. Many homeowners don't receive their Truth in Lending Statement until closing, which is an illegal delay, and at that point it it's too late to change anything. Prepayment penalties are required to be disclosed to the borrower clearly in a way that he can understand.
  
• 3. Document Preparation Fee: It is an overcharge or a fee for doing paperwork that should be covered by the loan origination fee.
  
• 4. Administration Fee: Any administration fee should be covered by the loan origination fee.
  
• 5. Credit Report Fee: Credit reports usually cost between $6.00 and $15.00. Many lenders are charging as high as $65.00 for a credit report. It is illegal for a mortgage lender to charge more for third party costs such as appraisals or credit reports, without declaring it as an extra profit.
  
• 6. Application Fees: "Application Fees" are often charged as well. Application fees could be called a "junk mortgage" fee. An application fee should be covered by the loan origination fee.
  
• 7. Courier Fee: Lenders often charge courier fees ranging from $40 to $100 on mortgage transactions. Courier fees are costs to overnight ship the closing documents from the lender to the escrow company. U.S. Postal Service rates for a standard closing package by express mail overnight only cost $22 or less to anywhere in the United States.
  
• 8. Yield Spread Premiums: Yield Spread Premiums were created to increase the borrower's interest rate a little so the lender and broker can get paid origination fees and other mortgage fees with less out of pocket cost to the borrower. Many lenders and brokers have been "double-dipping" by charging borrowers both the normal fees and a poorly disclosed "yield spread fee." As a result, the borrower pays his mortgage origination fees twice (without knowing it). While mortgage brokers are required to disclose the yield spread premium to the borrower, mortgage bankers are not required to (even though they get yield spreads too). Lender liability for poor disclosure of the yield spread can lead to a law suit.
  
• 9. Title Insurance Fees: Next to the "Yield Spread Premium" (YSP) scheme outlined above, the biggest overcharge in the mortgage industry is "Title Insurance." Title insurance costs can cost $6000 (or more) for a home purchase, when it's only paying for five minutes time for a title clerk to check a property title for tax liens, mechanics liens or lawsuits. Basic title insurance costs should be only $300 to $400 no matter how much a home is worth, because the process is the same for all homes.

Banks, mortgage bankers and brokers may now have enormous liability because of these overcharges.

Check out Washington Mutual Fraud and Stop Bank Fraud to see examples of bank fraud.

Beat Foreclosure Fast is a website to help you beat foreclosures.

Get EZ Loans can point you toward getting a loan.