There has always been a veil of mystery and uncertainty for consumers when applying for a home mortgage loan. Consumers have been in the dark about many aspects of the mortgage processing procedure. Frequent questions have been: What takes place in the process of deciding whether or not an applicant is qualified for the loan? How are costs calculated? What are these precise costs?
That veil has been lifting in recent months, due to increasingly sophisticated information and interaction capabilities of Web sites such as Mortgage101.com. It will soon be lifted even more, thanks to the continuing development of computer technology.
The mortgage banking industry is making a major effort to make consumers aware of the steps and costs involved in
processing a mortgage loan. Recent advances in technology allow lenders to make loan underwriting decisions through sophisticated computerized systems.
Although these automated underwriting systems provide rapid and consistent decisions, they don’t yet provide much information for the consumer on how the decisions are made. This has contributed to the consumer’s frustration.
The new effort is designed to demystify the home loan process for borrowers seeking loans. The nation’s key housing and mortgage organizations are teaming up to structure and implement this new consumer awareness program.
Actively participating in the project are Fannie Mae and Freddie Mac, the largest secondary mortgage buyers in the country. Also, the U.S. Department of Housing and Urban Development (HUD) is involved, along with the Mortgage Bankers Association of America. “Whether you call it a `glass box’ or an `open book’ concept, the bottom-line is that the mortgage industry is on a true course towards assuring that its consumers are well and fully informed about the procedures and costs of homebuying,” said Christopher Sumner, MBA president. “This is definitely a step in the right direction, assuring consumers open access to the loan decision-making process.”
The information and tracking system will be tied to in-house computer systems and Internet Websites.
But one sticky problem still exists. In its proposal to use its Website to disclose mortgage application costs, Fannie Mae reinforces other housing groups in calling for a comprehensive reform of the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act – the two major laws governing the disclosure of mortgage costs to homebuyers.
“Until we achieve real reform of RESPA, consumers will continue to be confused by weak disclosures,” said Paul Reid,
MBA vice president. “Real reform of these laws is a necessary next step in putting consumer rights back at the forefront of the homebuying transaction.”
Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends. It’s titled “Open House” in most newspapers, and carries his byline as James M. Woodard. He is also a professional
storyteller with a Web site at: www.storyteller.net/jwoodard/