Confusion About Home Loans and Mortgage Lenders Disclosures

By: Kristin Gabriel

Confusion among homeowners due to ineffective and complex mortgage disclosures resulted in a study by the Federal Trade Commission in which 800 percent of mortgage customers were given disclosure forms for an abstract loan. The message is loud and clear there is a need for easy to read and comprehensive mortgage terminology.

A Los Angeles Times article written on June 14th describes how most borrowers are perplexed by the complexity of mortgages. Kristof shows how most borrowers are perplexed by the complexity of mortgages due to an unsuccessful explaining of costs and the risks of home loans as well as a lack in the understanding of the terminology.

In a press release issued May 7, 2007 by the U.S. Department of Justice and the Federal Trade Commission (FTC) the purpose of the joint report, "Competition in the Real Estate Brokerage Industry," is to inform consumers and others involved in the industry about important competition issues involving residential real estate, including the impact of the Internet, the competitive structure of the real estate brokerage industry, and obstacles to a more competitive environment.

In a complicated world that demands constant attention and offers an array of choices, the fact is, consumers prefer less choices and simplicity. A number of details lead to complexity and this can overwhelm consumers. It is all too common; the more choices we have the more we struggle to choose.

Have you ever heard of anybody complaining about the bundling of gas prices? What you don't see is that the local state and federal government each gets one third or 33 percent of money in taxes, while the oil companies get ten percent and gas stations get five percent. As far as gas prices, where does the money go? Nobody cares.

Itemization of many of the details in mortgage disclosure documents often confuse people. Perhaps, a bigger problem is the deceptive tactics often used by the mortgage lenders to sell home loans to consumers as shown in the study.

Deception is also more of a problem than just confusion. New companies will resolve the confusion, including services where real estate agents and lending professionals can facilitate approval and processing of loans for customers faster.

Consumers should look for companies like this that provide a clear diagram of the program class loan amount, total down payment and closing costs, monthly payments, loan rate, APR, commission, and agent yield. Borrowers can identify the loan amount, the upfront cost of the loan, penalty amounts, the annual percentage rate, the amount of cash due at closing or the monthly payment, and if the payment included charges for property taxes and insurance.

Mortgages
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