Financial Errors In Mortgage Lending

Posted by on January 24, 2013 in Real Estate | Comments Off on Financial Errors In Mortgage Lending

Obtaining a mortgage loan is one of the most important steps in buying a property. But then again, it’s not always that borrowers or lenders get the best deal. Something can always go wrong and the mortgage business is not exempted from these errors. Mortgage business is a highly profitable business with a great deal of leverage. However, they can still make mistakes as in very serious that they can go to jail or fined. Furthermore, these lapses can further make the mortgage or lending rules stricter.

Dean Harrington, on his article “The Seven Deadly Sins of Real Estate and Mortgage Lending,” wrote the seven deadly mistakes made in real estate and in mortgage industry which have been prevalent ever since. This report has been taken from the bank examiners and internal compliance auditor’s report from the most systemic violations in the real estate lending world today.

  1. Good Faith Estimate (GFE) missing information, not filled out completely, or not delivered within three days
  2. Truth-in-Lending (TIL): ditto GFE, same issues
  3. RESPA disclosures not in file
  4. Servicing Disclosure Statement is not provided to applicants
  5. HUD-1 figures do not match up with GFE
  6. FHA Addendum to Application is not in file
  7. Underwriting approval can’t be seen.

Lapses in mortgage mistakes never really change in the past six years. But we must not put all the blame to mortgage bankers because borrowers are as guilty as charge.

  • Getting a mortgage at all if you don’t plan to stay put.
  • Not checking — and fixing — your credit.
  • Not getting a fixed-rate mortgage.
  • Reject an FHA loan.
  • Borrowing too much money to purchase
  • Getting just one quote.
  • Failing to buy down your interest rate.

These mistakes can be really costly and disastrous which affects both the borrower, the mortgage lender and the real estate market as well. Perhaps you can’t do something about how the mortgage business is run even if the rules makes it hard for you to buy a property, but it would be great if every home owner is responsible enough for educating himself of the following pitfalls before shopping around for mortgage or buying a home.