Consumers cautioned about specialty mortgage productsMortgagePress.comspecialty loans, abusive lending practices, consumer education
The National Association of
Realtors (NAR), a real estate trade association, and the Center for Responsible
Lending (CRL), a non-profit research and policy organization
that seeks to protect homeownership and family wealth by working to
eliminate abusive lending practices, have issued a brochure,
"Shopping for a Mortgage? Do Your Homework First." The publication
is part of a consumer education campaign by NAR and CRL addressing
specialty loans and abusive lending practices.
The brochure helps consumers understand conventional loans such
as fixed-rate and adjustable mortgages, and more exotic loan
programs such as interest-only mortgages, 40-year fixed-rate
mortgages, negative amortization loans and option payment
adjustable-rate mortgages. For example, the brochure warns
homebuyers that monthly payments on some types of specialty
mortgages can increase by more than 50 percent when the
introductory period ends.
"The growth of the specialty mortgage market has helped many
borrowers finance the American dream of homeownership, but these
mortgages come with risks," said NAR President Al Mansell.
"Consumers are susceptible to loans with monthly payments that can
spike dramatically, or that actually increase the amount they owe
on their home."
According to "The State of the Nation's Housing 2005," issued by
The Joint Center for Housing
Studies of Harvard University, one in four home loans in 2004
was financed with an interest-only mortgage. Three years ago, these
mortgages comprised only a few percentage points of the total
mortgage market. With an ever-increasing number of homebuyers
financing their home purchases with specialty mortgage products,
NAR and CRL felt it necessary to begin educating the public about
the risks and benefits of these mortgage products.
"We're warning homebuyers to approach these new mortgages
carefully," said Mike Calhoun, general counsel of the Center for
Responsible Lending. "They should be cautious about accepting a
mortgage they can't afford. These mortgages can be devastating for
families who are stretching their budget to buy a home."
Topics covered in the brochure include common types of specialty
mortgages, the major risks involved, questions to consider, and
helpful steps to take before financing a home.
"Shopping for a Mortgage? Do Your Homework First" is available
on both the NAR and CRL Web sites as a downloadable Adobe PDF
file.
For more information, visit www.realtor.org or www.responsiblelending.org.
