Consumer Home Mortgage Information
- Prior to signing your mortgage document, the lender must tell you about all of the fees that will be attached to your mortgage. A mortgage document can have a lot of confusing terms that the average consumer knows nothing about. One of the purposes of the Truth in Lending Act is that the lender must explain any ambiguities in the loan documents so that the consumer has a clear understanding of what is meant.
- A common practice in the mortgage industry is for lenders to sell mortgages to other lenders. There are a lot of consumers who would like to stay with their original lender, although this is not always possible. The original lender is required to give a 15-day notification to the consumer before the loan is transferred to another lender. Consumers will often, as a matter of habit, continue to send their payments to the original lender. There is a 60-day period in place that prevents customers from receiving a late charge if a payment is sent to the original lender. Customers cannot be reported to credit reporting agencies by the new lender due to late payments during this grace period.
- According to Regulation Z, a part of the Truth in Lending Act, lenders must give you a three-business-day rescission period after signing your mortgage document. This gives you time to think about the transaction you have just taken on. After reviewing all of the information, you may decide this is not the right decision for you and you may cancel the new mortgage. It does not apply if you want to refinance your loan with the same lender. If you are taking out a loan to have your home built, the rescission notice also does not apply. The rescission notice is not applicable for first mortgages or when you initially purchase your home.
- There are a number of lenders involved with predatory lending practices. This is when lenders include fees and other costs unknown to the customer at the loan closing. Other fees include prepayment penalties that a borrower may not be aware of. They also encourage borrowers to refinance their loans frequently, which gives the lender the ability to charge closing costs and other fees more often. For the lender, this represents additional profit and many times has no advantage for the customer.
- Mortgage loan documents have an acceleration clause, which means that if you miss a payment the lender can at any time demand that you pay your loan in full. If you consistently make late payments, you might cause a lender to activate this clause. If you are forced to refinance with another lender and your credit prevents you from doing so, your lender may start foreclosure activities.
