Group certifies 'fair and safe' lenders
Fair Mortgage Collaborative launching today
By Inman News, Wednesday, June 10, 2009.A group of mortgage lenders, nonprofit foundations and advocacy groups will certify mortgage lenders as "fair and safe" in their dealings with consumers when they agree to follow the group's standards, which limit or prohibit many types of loans popular during the housing boom.
The Fair Mortgage Collaborative officially launches today with backing from high-profile groups like the Ford Foundation and the National Council of La Raza. The group's mission: to offer low- and moderate-income and minority homeowners an alternative to predatory lenders by providing "mortgages with the consumers' best interests at heart, at a fair rate of compensation."
So far, there are no household names among the Fair Mortgage Collaborative's participating lending organizations, which include the Boeing Employees Credit Union, the Federation of Community Development Credit Unions, the Federation of Appalachian Housing Enterprises Inc., Mortgage Grader and Clearinghouse Community Development Financial Institution.
The group also counts loan counseling and lending networks (including NeighborWorks America) and secondary market intermediaries (such as Neighborhood Housing Services of America) as members.
Collectively, lenders certified by the Fair Mortgage Collaborative offer mortgages in most of the nation's most populous states, including California, Florida, New York, Texas, Arizona, New Mexico, Illinois, Minnesota, Washington, Oregon, Pennsylvania, Kansas, Missouri, Arkansas, Maine, Maryland, Vermont, Connecticut, Kentucky, West Virginia and Tennessee.
The Fair Mortgage Collaborative's standards -- first adopted in August -- prohibit members from originating or marketing "no doc" and stated-income loans, negatively amortizing loans other than reverse mortgages, and loans with prepayment penalties other than FHA loans or those funded by public agencies. Also banned are first-mortgage loans with balloon payments of less than 10 years, and credit insurance offered by institutions affiliated with the loan broker or lender. ...CONTINUED
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Submitted by Bruce Hahn on June 10, 2009 - 6:51am.
American Homeowners Grassroots Alliance
This is a good development. Our current mortgage crisis was born of lenders abandoning sound underwriting principles, and there is currently no law to prevent them from doing that again once the current crisis abates.
Part of what the Fair Mortgage Collaborative is trying to do is in effect restoring the kind of underwriting criteria that lenders should never have abandoned in the first place. If lenders won't even look out for the best interests of their own stockholders, its good that others are stepping up to help protect financially naive low and moderate-income and minority homeowners from unwise choices they shouldn't have been offered in the first place.
Bruce Hahn
American Homeowners Grassroots Alliance