How Credit Affects Your Mortgage

[Image via Credit Sesame]


Weigh In on the CFPB’s Draft Monthly Mortgage Statement

If you have a hard time making sense of everything included in your monthly mortgage statement, you now have a chance to help get that changed.  Earlier this week, the Consumer Financial Protection Bureau (CFPB) announced that they are seeking public input on a draft monthly mortgage statement designed to make it easier for homeowners to understand their loans and help avoid any extra costs or fees.

According to CFPB Director, Richard Corday:

“This draft statement shows consumers the breakdown of their mortgage payments – what money goes to the loan principal, interest, and fees…This information will help consumers stay on top of their mortgage costs and hold their mortgage servicers accountable for fixing errors that crop up. Given the widespread mortgage servicing problems we’ve seen over the past few years, consumers need clear disclosures they can count on.”

The draft, pictured below, is also available via CFPB’s website.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, most borrowers must receive periodic statements with specific information about their account, most typically typically from their mortgage servicers.  According to CFPB. statements must include information regarding:

  • the principal loan amount
  • the current interest rate
  • the date on which the interest rate may next reset
  • a description of any late payment and penalty fees
  •  information about housing counselors
  • a telephone number and email address that may be used to contact the mortgage servicer

Currently the CFPB is testing out a prototype monthly statement with consumers to make it as user-friendly and useful as possible. In a press release posted on their website, the CFPB explained:

“In order to broaden the input it receives as it develops a standard statement, the CFPB is also posting the prototype online to solicit general feedback from consumers, industry stakeholders, and other interested parties. The public will have further opportunity to provide comment on a version of the draft standard form when CFPB proposes a rule on it later this year. The development and publication of a consumer tested and publicly-vetted monthly statement will benefit consumers and facilitate compliance by mortgage servicers and creditors.”

The prototype is scheduled to become available for public comment sometime this summer.

For more information about the draft statement and how to comment, visit:

New Mortgage Complaint Hotline

Got a beef with your mortgage lender? Is your bank unresponsive when you complain that your escrow account is fouled up and making your monthly payments needlessly high?

Did your loan officer switch you into a more costly home loan than you were promised? Or worse yet, did your home loan servicer ignore you when you told him you’ve had an unexpected drop in income and needed a modification to avoid missing payments?

If any of these sound familiar to you, there’s a new federal program that might be of interest to you: the Consumer Financial Protection Bureau’s home mortgage complaint and dispute resolution hotline. Never heard of it? “That’s not surprising since it went live only Dec. 1 and the bureau hasn’t said much about it, preferring to ease into the potential snake pit of mortgage issues that American consumers have with their lenders rather than get overwhelmed.”

The Los Angeles Times reports that, “the Consumer Financial Protection Bureau’s new mortgage complaint service is an extension of the agency’s existing hotline for credit card-related disputes and inquiries.”

Created by last year’s Dodd-Frank financial reform legislation, the bureau is intended to look out for your interests in banking, financial products, home loans and all other forms of consumer credit.  The mortgage complaint service began July 21 as an extension of the agency’s existing hotline for credit card-related disputes and inquiries.

The bureau’s credit card hotline has already received 5,074 complaints. Of this total, 84% were referred directly to the card issuers — mainly big banks — for resolution, while the rest were either reported with incomplete information or were referred to other agencies for resolution.  According to the Times, “About 74% of the complaints were subsequently reported back from banks as resolved, and 71% of the resolutions were not disputed by the consumers who lodged the complaints. Just under 13% of credit card complainants reported that they were not satisfied with the card issuer’s actions.”  The credit card complaint service will provide a basic template for the bureau’s approach to mortgage complaints, which are expected to be greater in numbers.

Here’s a basic breakdown of how it will work:

When a borrower submits a formal complaint to the bureau, complete with account numbers and other key identifiers, the information will be sent immediately to the lender or mortgage servicer named in the complaint using a secure Web portal.
The lender must then review the information, contact the customer if needed and determine what action to take to resolve the matter.

Next, the lender is supposed to report its action — if any — to the bureau, which sends it on to the borrower for review.

The hotline does have a few limitations to note.  Disputes that are a matter of state regulation, or beyond the bureau’s scope may be referred to other agencies.  Disputes that indicate fraud or identity theft will likely be referred to either federal or a state law enforcement authority.  Just for now, the bureau is also referring all complaints involving small banks or their subsidiaries that have less than $10 billion in assets to other agencies.

However, since the vast majority of loan originations and servicing in the mortgage filed are controlled by the top 10 largest banks or their subsidiaries, a very high percentage of the complaints received are likely to be handled by the bureau.

An added bonus for consumers who do file a complaint is that throughout the process, borrowers can log on to a special consumer site, or call the toll-free number, to check for any updates, to provide additional information on the complaint, and to review any responses from the lender.

It all sounds great in theory but how will it work out?

Though consumer groups are optimistic, and the bureau says it’s staffed and ready to go, some mortgage industry leaders worry that the agency could be taking on more than it can realistically handle and raising borrower expectations that can’t be met.  If the bureau is not properly equipped to handle large volumes of emails and calls, the service could be ‘an investigatory black hole’ where complaints are filed but not addressed quickly or adequately, and it could be ‘a net negative’ for borrowers who have genuine problems.

A full report on the results of the first few months is expected from the agency is expected sometime early in 2012.

The complaint hotline is accessible online at and by toll-free phone between 8 a.m. and 8 p.m. Eastern at (855) 411-2372.

Same Price, Lower Cost

According to the KCM Blog, an increasing amount of research continues to build the case  that it makes great financial sense to purchase a home today.

Whether it be rent vs. buy ratios, income-to-price ratios or income-to-mortgage payment ratios, purchasing a home right now is a bargain compared to historic norms. Now we want to look at the COST of a home today compared to pre-peak prices.

According to the most recent S&P Case Shiller price index, residential real estate values have returned to 2003 1Q PRICEs. That, in itself, says something. However, when you factor in mortgage rates, the case for buying a home today becomes even more compelling.

In 2003, 30 year mortgage rates stood at 5.88%. Today, they are 4%. How does that impact the actual COST of a home? On a home purchased for $250,000, here is the difference in monthly cost:

That means you’re saving $285.30 a month, $3,423.60 a year and $102,708 over the life of a 30 year mortgage.

You buy the home for the same PRICE but the COST is over $100,000 less.

Maybe this is why so many financial advisors are saying that this could be one of the greatest times in history to purchase a home.

How to Pick Your Lender

Buying a home can be a whirlwind process, and with so many things happening at once, the last thing you’d want to do is make it more complicated than it needs to be.  Since we’ve always advocated the importance of picking the the right real estate professionals to work with, we thought we’d share some hints to help you pick your lender, courtesy of the KCM blogging crew.

What type of company is it?

These days you can chose from a variety of institutions that offer lending services.

There are mortgage brokers, mortgage bankers and banks/credit unions. Mortgage brokers have been hamstrung by many of the recent regulatory changes and typically lack the actual ability to approve and/or lock a loan. Banks are usually limited in program choices and hamstrung by tighter underwriting. Mortgage bankers have the financial stability and direct lending capability of the bank coupled with the wide product menu and expertise of the mortgage broker. From a global perspective, I see mortgage bankers as a clear winner.

How does the company operate?

It’s important to work with a company that knows your area, is familiar with ins and outs of each neighborhood, and will employ affiliates (i.e. appraisers, loan processors, etc.) that are equally as knowledgeable about the local market.  Save yourself from headaches down the road and ask the questions upfront.

What about the individual loan officer?

Having a good relationship with your loan officer can become the biggest factor to a successful transaction.  How well do they education you about the process, the requirements, the factors that determine your approval or the interest rate you get?  The last thing you want is to have someone you don’t communicate well with guiding you through an already foreign process.  The KCM crew notes that, “This is difficult to determine on your own which is why the referral from another person who used them or your real estate agent has far more value than most people know (until it’s too late).”

Bottom Line?

Too many people stay focused on quoted rates and fees and neglect to see the whole picture of what is needed from a lender.  KCM’s advice? “Look for great communication, superior information and education, understanding of the local market and someone who looks at your application as something more than a number. Be prepared to pay a little more to get a better experience (even though it might not cost you any more)….in the long run, lowering stress can be more important.”

Taking Out a Reverse Mortgage

More and more homeowners are starting to consider taking out a reverse mortgage.  A reverse mortgage could convert the equity of your home into cash, but don’t sign up unless you fully understand the costs.   CNN Money recently offered their take on what to keep in mind when considering a reverse mortgage.