Commentary and market information for Kansas City Real Estate. Published by Rochelle Walker, Realtor, Natalie Burton Five Star Realty, LLC Contact me Local: 816-305-4140
Have you looked around your neighborhood lately and seen a lot of foreclosed homes? You know, the ones with the white paper signs in the windows or on the storm door that no realtor sign has appeared yet. Did you wonder what happened to the nice family that moved in and are now gone?
Most likely, the family was faced with predatory mortgage lending practices. These practices strip borrowers of home equity and threaten families with foreclosure, destabilizing the very communities that we work and live in. All one has to do is look at the list of mortgage companies that have filed bankruptcy, halted major operations, or are significantly scaling back. Everyday one hears about some plight the purchaser of homes may be in because of lending practices that are rapidly changing.
According to the National Conference of State Legislatures the most prevalent categories of abusive practices include:
- Loan flipping -- repeatedly refinancing loans, charging high fees each time.
- Excessive fees and "packing" -- adding fees far exceeding those justified on economic grounds, often through loan terms, such as the financing of points, fees and pre-payment penalties, single-premium insurance (to cover the balance of the loan should a borrower die, paid in one sum and added to the amount financed) and balloon payments (those due at the end of a loan that are significantly higher than monthly payments).
- Asset-based lending -- lending based on a borrower's overall assets, rather than income and ability to repay.
- Outright fraud and abuse.
As a home buyer one should constantly check with their mortgage lender to ensure the status of their loan especially if you received a preapproval letter. Preapproval doesn't guarantee your loan. It is also more advisable to work with long standing institutions for your home loan and clear up your credit issues prior to using an organization that you know little about!