Will New Governmental Agency Prevent Another Mortgage Crisis?
June 26th, 2009 categories: Chicago Real Estate News
The Obama administration last week announced a new plan designed to prevent any future mortgage meltdowns like the one we’ve seen during the housing slump. The plan would result in a new consumer protection agency that would have broad powers to revamp the way the mortgage-lending business works.
According to a feature story on the Politico blog, the proposed new agency would require mortgage lenders to offer consumers loans with simple terms in addition to those with more complex terms. Borrowers would have to opt out of the simple mortgage loan products if they wanted to instead go with the more complicated versions.
The new agency might also place more responsibilities on mortgage brokers. Though nothing is final yet, brokers might have to make sure that their customers can afford the mortgages they write for them. The new consumer agency might even ban certain lending practices such as pre-payment fees, which on some loans are passed on to borrowers who pay off their mortgage loans early.
The consumer protection agency wouldn’t concentrate only on mortgage lending, but would also oversee the way credit card companies charge their customers.
It’s all part of an effort, Pres. Barack Obama said last week, to prevent another financial disaster like the one that pushed the country into the recession we’re still trying to work our way out from.
Is this new agency a good idea? Anything that protects consumers is a positive. But borrowers have to remember one thing: They have to use some common sense, too, when applying for mortgage loans.
First, it’s important for borrowers to only work with reputable mortgage professionals. Despite what you might read in the newspapers, the vast majority of mortgage loan officers, bankers and brokers are honest, hard-working and smart professionals. If you’re looking for a loan officer, check with your REALTOR®. He or she should be able to recommend several.
Secondly, if you feel that a loan officer is trying to talk you into taking out a mortgage product with which you are uncomfortable, walk away. There are many more professional mortgage loan officers out there.
Finally, take an honest look at your financial situation before applying for a mortgage loan. You know how large of a mortgage payment you can make each month. Don’t try to stretch yourself too thin financially to get into a more expensive home.
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