With some unrest and correction going on in the mortgage industry nationwide, there are ways homebuyers and lenders can protect themselves, and there are groups who can help.
As regulators, the Mississippi Department of Banking and Consumer Finance is putting out guidelines to lenders, encouraging better disclosures in plain English.
“The exotic products of sub prime lenders have come about by trying to get people who don’t qualify for traditional loans into homes,” Commissioner John Allison said. “Many times, these people do not understand these products. We’re not saying don’t lend the money, but do it responsibly.”
To lenders: do a suitability of the borrower. “Will they have the cash flow when these things change? “ he asks. “Explain the products better.”
To borrowers: don’t be enamored with these products. Study them. “We certainly support financial literacy,” Allison said. “We have an ease of credit these days, and we also have a generation that wants everything now. They don’t want starter homes.”
Freddie Rowell, mortgage production manager for Regions Bank’s Central Mississippi district, advises: deal with reputable lenders; follow good, sound financial advice; and, use common sense.
Navigating the maze
The Mississippi Association of Realtors encourages members to take an active role in helping homeowners navigate the complex mortgage application process.
“The trouble is, many of the borrowers getting locked into bad loans are doing so when they attempt to refinance. At that point, the Realtor typically isn’t in a position to intervene,” said executive director Angela Cain.
As the first point of contact in a real estate transaction, Realtors are in a position to inform and guide consumers through the maze of financing alternatives to make sure a homebuyer’s mortgage meets his or her financial needs. A series of consumer education brochures on mortgage products and services are available through the National Association of Realtors at www.realtor.org.
“Realtors will generally offer borrowers information about conventional products like fixed rate and traditional adjustable rate mortgages (ARMs) that may not be good choices for first-time homebuyers” she added.
Crisis or crunch?
The Mortgage Bankers Association of Mississippi (MBA) has increased its research, advocacy and communications efforts to help give consumers and the media better information, according to executive director Quentin Whitwell.
“MBA accelerated efforts to reach out to the media to present the facts, help quell the frenzy and shift away from the ‘foreclosure crisis’ to the potential for a ‘credit crunch’ that could result from over legislation and over regulation,” he said. “MBA has brought sound and rational research and ideas to the ongoing discussion through its highly credible analysis and forecasting, resulting in a more reasoned and fact-based debate on the causes and effects of the current conditions.”
Allison also cautions against over regulation. “Let’s take a breath and look at the situation,” he says. “It’s getting a lot of play in Washington and we don’t want a knee-jerk reaction that will turn out to be detrimental. We don’t want legislation that will hurt the housing industry because it’s a big part of the economy.”
Contact MBJ contributing Lynn Lofton at email@example.com.