Feds propose a Mortgage Contract

March 28th, 2007

Feds propose a Mortgage Contract

by admin

Mortgage Contract in the works?

In testimony on Capitol Hill yesterday the idea of creating a 1 page disclosure document signed by both the borrower and the loan originator was proposed by Alex J. Pollock, Resident Fellow, American Enterprise Institute.
From an article on BrokerNewswire

To educate borrowers, Pollock introduced the idea of a one-page disclosure that would give the essentials of the loans and which would be given to every mortgage borrower a week before the closing.

“When considering borrowers in financial trouble, there is a natural desire to try to protect them,” he said. “I believe the superior strategy is to equip them to protect themselves.”

The disclosure would include:

amount of the loan;
LTV ratio;
final maturity;
prepayment fee if there is one;
balloon payment if there is one;
points and closing costs;
initial rate on the loan in percent and monthly payment in dollars;
how long the rate is good for;
fully indexed rate on the loan in percent and monthly payment in dollars;
the household income on which the loan was based;
initial monthly payment as percent of income and payment plus taxes and insurance as percent of income;
name, number and e-mail for the borrower to contact with any questions;
an authorized signature of the loan originator; and
the signature of the borrower.

“A good lender wants an informed and understanding borrower,” he said.