In Business / July 2007
Defending the Home Front
By Muyly Sitea
Risky lending practices have triggered what may be the worst foreclosure crisis in the modern mortgage market; and according to the Center for Responsible Lending, 2.2 million American households will lose their homes. Sadly, women and minorities bear the brunt of the current mortgage fraud, foreclosure and predatory lending crisis—consistently charged excess fees, more aggressively preyed upon by subprime lenders and taken advantage of more often than their male counterparts.
According to the Consumer Federation of America, women are 41 percent more likely to receive higher-cost subprime mortgages with interest rates averaging five points higher than men. Over the life of the mortgage, women preyed upon in this way can pay between $85,000 to $160,000 more in interest than the average male borrower.
The injustice of targeting women is heightened when it is considered that on average women have higher credit scores than men. In fact, according to the national credit reporting agency, Experian, the average female credit score is 682—compared to 675 for men.
There are some counter-tactics that can help empower and protect women through the mortgage process.
A woman should recognize and not overpay unnecessary title fees. Lenders and insurance companies make a great deal of money by charging excessive fees and selling optional policies. While these companies are regulated as to what they can charge per fee, they aren’t limited in the number of excessive insurance policies they can offer. For the average consumer, what is required and what is optional is not entirely clear—and virtually no one reads all the fine print.
Buried in section 1100 of the lengthy “Good Faith Estimate” provided by any reputable lender, homebuyers will find estimates for title insurance – both a “Lender’s” portion and an “Extended” portion. The “Extended” portion is optional! By simply opting out of this, homebuyers can save roughly 10 percent off the top of their title fees.
It always helps to negotiate the best deal. Promises of “zero fees” are too good to be true. While some may say they are making zero or very little on a deal, brokers make the bulk of their commissions through the not-so-obvious Yield Spread Premium (YSP) – or the money the bank pays them on the ‘back end’ of the deal. Understanding how to calculate the profit a broker makes from a transaction allows consumers to negotiate the best deal possible. There are forms that lenders have available that expose this additional profit – a woman just has to know what to ask for.
Another important saving can be made by avoiding prepayment penalties. Most banks and mortgage holders won’t hesitate to enforce a typical $5,000 to $15,000 prepayment penalty. Prepayment penalties are evidenced in 70 to 80 percent of all subprime home loans, while almost nonexistent in the prime mortgage markets. Since subprime lending now accounts for one out five mortgage loans, the different practices in the subprime market come at a staggering cost. Women should investigate whether their penalty is hard or soft. A hard prepayment penalty means the penalty is due whether the home is sold or refinanced, but the soft version means payment is due only after a refinance – meaning consumers may be able to avoid this costly penalty altogether.
Predatory lending occurs when complex mortgage terms and interest rate risks are not fully explained as required by federal law. The borrower is usually the victim. But even when practices are not predatory, blindly trusting a loan officer or banker can cost homeowners tens of thousands.
Muyly Sitea is the co-founder of TruthinLoans, a consumer resource to educate and inform consumers regarding mortgage fraud and predatory lending practices. For more information, www.truthinloans.com.
Copyright © 2007 A Woman's View. All rights reserved.
Top • Home • Subscribe • Advertise • Submit • Distribution • Contact
Support Our Advertisers • Organization Resources • Women Owned Business
Designed by Livewire Studio
Send an Email About This Article