Mortgage Lender Overcharging of Homeowners on the Rise

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Just completed report of recent mortgage transactions finds overcharging of first time homeowners and or existing homeowners is increasing at historic rates. Pre-closing audits or examinations of the mortgage transactions are seen as the only solution to protect homeowners from being cheated or overcharged.

In 2004 The National Mortgage Complaint Center completed a year long national survey of mortgage lenders to determine national fee standards and or fee averages for homeowners about to refinance/finance, and the results were grim. Rather than finding a competitive market, the survey discovered widespread fraud, cheating and or bilking of the citizens about to refinance or purchase a home. Because these results were so troublesome, the National Mortgage Complaint Center revisited the previously surveyed lenders and their just completed mortgage transactions in 2005 to see if the situation had improved for the consumer. It had not. In fact, because there are so many new mortgage lenders and so many fewer refinances, it was discovered that many to most lenders had increased fees to borrowers and or not explained to the borrower that their interest rate had been raised over what was deserved, so that the lender/broker could recieve a kickback called a yield spread premium for increasing the borrowers rate.A typical yield spread would be a point (one percent of the loan amount) for every quarter point interest rate increase the lender/broker was able to get the borrower to agree to (knowingly or unknowingly). On an average $200,000 mortgage as an example, a quarter point interest rate increase over the best rate for the borrower might net the broker and extra $2000. A half point increase in the rate might translate into a $4000 kickback to the broker/lender.

According to this updated survey, the average US homeowner pays $1250 more in closing costs than would be considered fair market prices and may pay $29,000 more in interest related charges if the mortgage is kept for the typical 30 year term. The newest report also identified the fact that the majority of new homeowners or homeowners who refinanced did not receive the required Truth in Lending or Good Faith Estimates three business days after the completion of the mortgage application form (also called a 1003). Another huge problem according to the report included borrowers getting stuck with a prepayment penalty even though the lender said there would be no prepayment penalty. In other instances the mortgage lender tacked on fees for nothing also called junk mortgage fees. According to M. Thomas Martin, the survey's author, "there simply is no accountability on the part of many mortgage lenders, and the borrower simply has no place to go for a second opinion or an examination of mortgage documents prior to a homeowner actually financing or refinancing their home". Martin went on to say; "the average homeowner or the new home purchaser has no chance against greedy mortgage lenders intent on lining their pockets with the ill-gotten proceeds.

As a result of this newest information, the National Mortgage Complaint Center will begin offering a nationwide mortgage document examination and audit service for homeowners about to refinance or for home purchasers about to purchase a home, in the hopes of stopping lenders from taking advantage of unsuspecting borrowers. The National Mortgage Complaint Center will team up with honest real estate firms and or property management firms to offer this service in every state. It is felt by standing guard over the real estate firm's client, the real estate firm makes a life long friend by protecting the homeowner from being overcharged or defrauded by a greedy mortgage lender.

While the Federal Government and most states have consumer protection laws to protect homeowners, there is little or no enforcement on the part of government officials. The net result according to Martin is 55 to 60 million US homeowners (about 5 in 6 of all US homeowners)who were overcharged or cheated when they financed or refinanced their home. According to Martin worst of all, in most cases the homeowner continues to get cheated because they are paying for a higher interest rate or a higher mortgage balance each month. Realtors or homeowners wishing to have a pre-closing mortgage document examination are encouraged to contact the National Mortgage Complaint Center at Http://NationalMortgageComplaintCenter.Com/ . According to Martin,"homeowners should not expect much help from their elected state or federal officials because the biggest contributors to state or federal legislative committees assigned to oversight of banking or mortgage activities are in fact mortgage companies or banks". "Its kind of like the fox guarding the chicken coup". "kind of hard to get any consumer protection from elected leaders when they have been bought off by the very industry they are supposed to be watching", according to Martin.


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M. Thomas Martin
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