Mortgage Broker Practices Draw Scrutiny in Illinois
Today’s Chicago Sun-Times tells the story of a Spanish-speaking home mortgage broker who offered what seemed like a great deal to Des Plaines, Ill., homeowner Jose Cortez.
Cortez was told he could pay off his credit cards and car loan through simple mortgage refinancing on his home.
What the mortgage broker declined to mention was that Cortez would owe $17,000 in closing costs.
And, contrary to what he was promised, Cortez’s new payments don’t include property taxes and insurance.
Spanish speakers, seniors and other vulnerable homeowners often don’t spot astronomical fees and other ripoffs buried in the fine print by predatory mortgage lenders and brokers, consumer advocates say.
Another scam is to offer an initial monthly payment that doesn’t even cover the interest. Homeowners wind up owing more on their house each month - a phenomenon known as negative amortization.
Retired office worker Delores King said she now owes thousands of dollars more on her South Side home than when she refinanced in 2004. Her monthly payments nearly doubled after the 1.5 percent “teaser rate” expired.
“I’m going to lose my house if something doesn’t give,” King said at a news conference Sunday called by U.S. Rep. Luis Gutierrez.
Gutierrez is introducing a bill that would require brokers to disclose - in writing - all fees and penalties associated with Illinois mortgage loans.
If found in violation of the bill, predatory mortgage brokers would be liable for homeowners’ losses, plus legal fees and other damages.
A similar bill died in committee last session, but Gutierrez is much more confident now that Democrats control the U.S. House of Representatives.
Gutierrez’s bill is one of several pending right now in Congress. But the National Association of Mortgage Brokers says new regulation could restrict loan options for consumers.
The mortgage broker association instead proposes criminal background checks for brokers and better education for consumers.
SOURCE: Chicago Sun-Times