Overcharges run rampant in home loans

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

(This is part 5 of a six-part series. Read Part 1, Part 2, Part 3, Part 4 and Part 6.) Consumer groups believe that lenders should be held liable if they allow borrowers to take home mortgages that aren't suitable for them. In prior articles in this series, I concluded that a suitability standard was not an effective way to deal with bad mortgage selection, unaffordable loans or refinances that don't benefit borrowers. This article looks at suitability in connection with the problem of overcharges. Borrowers are overcharged when they pay more for the same service than they would if they had the information needed to shop alternative sources effectively. For example, you pay 6 percent and one point whereas if you had known where and how to shop you could have paid 5.875 percent and one point. I examine three categories of overcharging: lender steering, excessive broker fees, and loan officer overages. Lender steering refers to the unsavory practice of soliciting borrowers for loans...