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HUD cracks down on fraud
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September 18, 1997: 2:52 p.m. ET
Cuomo announces plan to save home buyers from excessive rates, fees
From Correspondent Kelli Arena
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WASHINGTON (CNNfn) - In a move that could save America's home buyers millions of dollars each year, Housing Secretary Andrew Cuomo on Wednesday announced new disclosure standards for mortgage brokers. Those brokers handle about half of the 6 million mortgage loans made each year.
Home buyer Robert Parker thought his broker was working to help him find a mortgage loan with the lowest interest rate. In fact, the broker arranged a high interest rate loan that earned him a higher fee.
"I trusted them to find me a mortgage at a good rate. He told me that was the best rate. I took his word for it. But now I know I could have done better than that," said Parker.
Stories like this have prompted housing regulators to propose some rule changes.
"If mortgage brokers have nothing to hide, they have nothing to lose by signing this contract. If they don't sign the contract we will presume there is a violation of the law," said Cuomo.
New standards would disclose up front all the fees the mortgage broker would receive, and whether the goal is to find the lowest interest rate or just provide a mortgage shopping service.
Consumer groups say it is a great idea.
"Unfortunately, mortgage brokers can use bait-and-switch tactics to inflate the price of the mortgage loan so they can line their own pockets," said Michelle Meier of the Consumers Union.
The group representing mortgage brokers say the changes are unnecessary.
"The contract is somewhat dangerous because it would lead a borrower to believe that a loan officer should represent them and should be the one to make the decision as to what the best deal is and what is in their best interest," said Brian Kinsella, of the National Association of Mortgage Brokers.
It could take months before the rule changes are formally enacted. In the meantime, if you choose to use a mortgage broker, regulators urge you to comparison shop.
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