Monday, February 06, 2006

Know your mortgage!

I've been reviewing details of a recent class-action legal settlement regarding Ameriquest Mortgage Co. that gives excellent guidance to all potential home-buyers. Here are some points I pulled out:

1. Anything you want to enforce, get it in writing. As an attorney this is sort of rule one regarding most contractual transactions. However, a lot of what Ameriquest was accused of dealt with oral promises regarding closing costs and prepayment penalties. Although not a great law, the Good Faith Estimates must be provided within 3 days of application...hold your lender to their estimate. Second, the prepayment penalty stuff is right in the note and mortgage on the first 1-3 pages typically. If there's a prepayment penalty in your document you're stuck.

2. Loan officers cannot influence appraisers. This is a hard area. Obviously inflated appraisals put home buyers into homes they can't afford and saddle them with debts that often push them into foreclosure or bankruptcy. However, lets not kid ourselves, buyers are usually a party to these distortions and want their property to "appraise out" so they can get their mortgage. I would simply suggest that people need to get a copy of their appraisals. Also, ask the loan officer about appraiser independence.

3. Inflated or fabricated income is not allowed. Ameriquest is no longer able to issue the "stated income" mortgages that require no hard documentation of borrower assets or income. Why are these mortgages allowed, period?

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