Thanks for voting!Ever wish mortgage lenders were more like windows and less like brick walls? That is, a little clearer about their rates, terms and what it means to you on a monthly, annual and long-term basis? Well, your wish just became the government’s “transparency” command.
On October 1, the Federal Reserve implemented game-changing legislation that puts the “Truth” back in the Truth in Lending Act.
For those who didn’t attend Lending 101, this little piece of Federal law is in place to protect consumers from higher-priced mortgages. What’s more, it tells lenders what they have to disclose to borrowers. Among other things, they now have to give you a heads-up about loan payment information in their advertising – way before you sign on the dotted line for a loan.
For certain loans, there are limits on prepayment penalties and a requirement to escrow for taxes and insurance. All good for us as consumers. But the changes don’t stop there. The new playing field also puts the onus on prospective borrowers stepping up to the plate. You’ll have to start getting used to more intense scrutiny from lenders about your ability to repay the loan with income and assets, etc. So your own financial house had better be in order, too.
What else does the Truth in Lending Act mean? In advertising, lenders have to provide specific payment examples. For example, if you’re looking at a 5/1 adjustable rate mortgage, they’d have to provide what the payment for years 1-5 would be based on a sample loan amount and advertised rate. Then, they’d have to provide what the “projected” monthly payment would be for years 6-30 based on the “projected” interest rate using the current index plus margin. And to take the transparency to the see-through level, all this needs to be near the advertised rates, or “one click away.” No lender can hide this information from potential borrowers. Translation: you’ll have more information at your disposal to figure out if a loan is right for you before the bank makes the decision for you.
Tags: Homeownership, Lending, Mortgage, Transparency
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Thanks for the education. I have made more financial misjudgments through ignorance and self-delusion, but the information provided by ING (as well as the encouragement as I save bit by bit) is helping me make clearer decisions.
Thank you ING for giving such vital information for the ING savers. I am very close to paying off everything and becoming debt free by March 1, 2010 (I have it all mapped out). I am planning on buying a house next year; this will help me to ask the right questions and be prepared of what kind of mortgage I can handle and what to expect. Actually this information will kind of be my cheat sheet when I step up to the plate.
Thanks again,
Delilah from Texas
Thanks ING for providing good information to me. I can always count on you.
This INGDirect sounds like a savior. If you have a CD to mature and let ING do the roll, you will end up missing a good opportunity from another bank. The interest rate is so low that you better put your money in the savings account. WATCH OUT! ING will never tell.
This is good information. I do wonder how much this truth in advertising will make a difference in the minds of consumers. I think that a lot of people (at least where I am) live in the here and now–if they can afford a big mortgage and a nice car now, that’s all that matters. And maybe I’m naive, but it’s hard to believe that consumers who got themselves an “adujstable rate mortgage” didn’t understand what that meant. These regs are definitely good. Consumers need to step up to the plate as well and educate themselves on what they’re signing.
As a former banker, I can speak first-hand to the benefits of Truth-In-Lending. I have seen more than one economic cycle of falling rates, then rising rates. I have also seen the “creativity” of new loan products being brought to the market (which the bosses at the top saw as good for the bank) that were promoted as good for the borrower.
My experience in banking began as a “recovery specialist” for the loan department to collect on loan accounts that had gone awry. I heard many stories of people who did not understand what they were getting themselves into with variable rate loans, loans that had a balloon features and would have to be re-approved, re-booked, new fees, etc., let alone the idea that the rate might be higher as well as their monthly payment.
I found that the Truth-In-Lending rules in place in the past were helpful and I insisted on going through the information with each borrower when I became a loan officer. The amount of detail that the rules required was not really enough, however; I welcome the additional disclosure requirements as much better information for borrowers to consider when they are looking for a mortgage loan.
Kudos to ING for being forthright about the new rules. They appear to be putting their arms around the idea that more information in the hands of borrowers before signing the loan is a good thing.
Thank you, ING, for all your valuable information. We refinanced our home 2 months ago and luckily the VA mort company we went with knew of these new rules and had them in affect in their presentations anyway. They told us the new rules would be in effect in October but they said they already made it their policy to be upfront with the consumers anyway and disclose everything in writing . They gave us details of our payments over the next several years, examples IN WRITING and after ‘bombarding ‘ them with our own questions, we were very satisfied with the answers we got from them. We’ve saving alot on our mortgage now with a new rate at almost 3% lower than what we were paying before . These new rules should help consumers understand how rates , fees, taxes can affect your payments years down the road and help you to make better decisions about your investments.
I have to say I don’t like the fact that you call it “The lending Game” this is NOT a game. Lets ALL get serious with our money.
Thanks for the info. anyway.
We still can’t get a “conventional” loan on our mobile home that is placed on our private property. While the taxing authorities consider this “real estate” so they can get their property tax money, the banks consider it a worthless trailer that could be hauled off by a dishonest borrower. So, we’re paying around 18% to a mobile home lending “specialist”. We’ll never see the light. At least we can write-off 99% of the payments on tax returns…that is until the government takes that away.
family tree update can be real fun !!!
I appreciate the emphasis on mortgages, and I may need one soon. BUT, I WISH ING would put more emphasis on SAVINGS again. At this time, ING’s various savings rates have tumbled down below may other banks and credit unions. Savings is what will allow me to get that mortgage I may need. ING, you’re still a life saver for me!
Thanks again ING!
Thank you for once again proving that only real path to wealth accumulation is the one that people in the “know” have used for centuries. Your advice sheds light on the often shady world of lending practices in the mortgage industry that has led so many to make misinformed, misguided decisions that affect their financial health.
The information was always there if people bothered to spend time to find it. Granted, lenders were guilty of making things difficult to find and I’m glad there are new requirements to make it harder for them to obscure things. Hopefully, it will also give consumers fewer excuses for remaining ignorant.
I agree with MK. The information has always been there. It was greed that pushed the sub-prime game to the heights which led in large part to the downfall of the economy in these last couple of years. The “traditional” banking guidelilnes and practices held that borrowers would have full disclosure and “truth” provided to them. With so many looking for a immediacy in satisfying their desires (whether in designer clothing. automobiles, or in their homes purchases) these and many other sound practicies seemed to be set aside and now we have all seen the results of that poor judgement. I am heartened that the pendulum is swinging back to the prior more conservative approach.
Imagine, having to actually be honest to the people that are supporting your business, SHOCK! and only because the Government is telling them to do so. Thanks ING for being honest from the beginning, and staying that way.
In 1999 to prepare for early retirement we had a home built in Florida using creative lending that combined the construction mortgage with a 5/1 ARM. It was very beneficial for us. Terms were clearly stated prior to our closing and by making additional principal payments monthly, we were able to pay the entire cost of a 2500 sq. ft. home in 8 years. I am glad that they did not “outlaw” the creative financing to protect the “poor me” people who did not understand what they were getting . Too often laws make everyone jump through hoops to protect the stupid.
Is this legislation really necessary? I have yet to see a loan closing document that does not disclose all terms. All this legislation does is pander to those who knowingly got in over their heads thinking they could flip or refi their house but got caught out. Poor, poor Fred…he had no idea his payment would increase. Sure.
How about legislation banning sub prime mortgages? Reinforcing the myth that banks caused the crisis won’t solve the problem. Congress pushing banks to make affirmative action loans to bad credit risks only penalizes responsible borrowers like me.
One more tidbit you won’t see in the news. At a friends restaurant he had 3 illega cooks and dishwashers who each purchased homes ranging from $350K to $500K despite no assets and minimal income. They then rented rooms to friends coming over the border. Disaster hit when the construction industry slowed, illegals left, and the cooks and dishwashers couldn’t make their mortgages.
Consider that prior to the Democrats (Barney Frank and Chris Dodd) controlling banking and finance in Congress, AIGs credit default portfolio was less that 5% subprime. By late 2007 it had grown to over 80%. What prompted this? Frank funded ACORN to push affirmative action loans and Dodd took big bribes (oops, I mean “campaign contributions”) from mortgage servicing companies who originated loans but weren’t on the risk.
Short answer, Congress caused this. Still don’t believe me? Dodd got a sweetheart loan from Wells Fargo that he won’t talk about plus he pulls in $10 million + in contributions from the banking industry.
What Banks need to advertise is the true interest they are earning on Mortgages. Because of the structure of the mortgage loan now vs SIMPLE INTEREST loans, consumers are paying more than double the advertised RATE. That is why mortgage securities are so sought after as investment people looking for a good deal.
Thank you for the great information. However, I wonder why ING doesnt support a traditional 15, 20 or 30 year fixed rate mortgage?
@Ken: Most Americans move or refinance every 5 to 7 years. So, we don’t think you should pay a premium on your interest rate for extra years you most likely won’t need.
If my memory serves me correctly, I worked in the mortgage department of a small local bank (since gobbled up) over twenty years ago, mortgage loans were much more simple (1, 3 and 5 year ARM and of course the fixed rates) but people did seem more interested in reading the loan agreement carefully and asking questions, or least their attorneys did for them. Anybody want to guess why this practice seemed to have stopped?
RegZ also stipulates that if your initial rate increase above .125%
near the closing of your loan, the lender has to redisclose the GFE
TIL and itemization docs to the mortgage borrower, redisclosing the
“real” cost of credit (borrowering and refinancing your mortgage).
I am considering a refi with ING and wondered if anyone out there has used ING and what kind of experience you have had. Rate seem very low…
I have a Orange 5/1 mortgage and wanted to take advantage of the historic low rates. I was very pleased with ING Directs rate renewal feature that enabled me to re-lock in a fixed rate albeit for a fixed fee (1 months payment). Recently, when I inquired with ING Direct about using the rate renewal feature they declined because loan-to-value for my was higher than 95%.Now, I did another rate renewal last year (payed the fee) and at that time ING did not have even check for anything since was not a refinance but a much simpler offier - apparently the policy shifted towards more irrational greed. Please explain to me how does it benefit me (remember -we the savers or save your money tagline) or even ING Direct to disallow an existing borrower to rate renew to take advantage of the significant saving at a new lower rate. This extra liquidity could be used to pay down my principal faster, enjoy more cash in my pocket for opening other ING accounts (which I don’t have incentive to do any more..sorry) AND ING reduces it’s risk from short sale or foreclosure but allowing me to pay off my mortgage on time. It’s also would have proved ING to be la oyal partner. and remember - this is an existing mortgage - so ING Direct is also in the same hole with me whether they like it or not - due to the unfortunate downturn in the housing market. I like all the ING products because they appear to be clear cut - but when you claim to use your primary sales tagline - “Save your money”..please atleast make some attempt to save me mine. Please change this policy for existing loyal customers with excellent credit has payment history.. like me - because it does not make any business sense at any level.
Tan, I’m in the same boat as you. I’ve been an extremely loyal advocate of ING but when I inquired about a rate renewal after 4 flawless years with an ING mortgage, they told me I needed to pay a very large sum to get the balance below 70% of the rock-bottom estimated worth they’ve come up with (the formula for which is NOT transparent). I spoke with representatives repeatedly and they expressed no flexibility or interest in working with me on a reasonable compromise. As you pointed, this is completely illogical as it should be a win-win situation for me and for ING. Instead, I’m left feeling ING is greedy and unsympathetic to the housing market and the needs of their loyal customers.