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Thursday, May 29, 2008

MORTGAGE LOAN INSPECTIONS ARE NOT NEEDED

From most things bad comes fear, and then well...crap. I'm talking about the latest development in the real estate market; something called the mortgage loan inspection. For about $275 you can have someone literally comb through your loan documents and potentially identify any problem areas, including those be darned predatory lending practices which have been partly to blame for the whole recent credit crisis. After the housing market all but took a dump and as thousands of homeowners face certain foreclosure (including many whom seem to have not understood the meaning of the word variable when used to describe their interest rate, but that's for another day) this would seem like a great idea. In fact, it could even be considered a smart move. It is but one more layer of protection for the potential homebuyer, because essentially if something does go wrong with the loan the homebuyer can point fingers at the inspector for failing to see problems. And why not, right? If you've followed any of the news at all on the subject, and there's been a ton of it, you'd be well aware that there have been lots of underhanded maneuvers and other shenanigans going on in the mortgage industry, and a ton of misinformed (and yes, some gullible) buyers got caught in a fine mess. Having some form of protection against such things may have saved many homebuyers from the frustration and despair they face now.

But here's my problem with that kind of thinking. It implies that people who do underhanded and bad things are free to continue on with their underhanded dealings so long as no one, like say a mortgage loan inspector, will be at the closing table to catch them in the act. It implies that bad contracts are going to be wholly binding heedless of how ridiculous or clearly fuzzy the terms, and that if someone comes before a lender that they determine to be gullible or otherwise uneducated or unprotected, then they (the lenders) have every right to take the buyer for the ride of their life.

We need not be protected by paying someone a fee. That's what we have lawmakers for. That is what we elect our officials to do. We put them in office to secure our interests as Americans. We want them to set forth laws that help to make our lives better. And yes, to provide us some form of protection from things like obvious predatory lending practices. After all this recent turmoil in the credit markets that's exactly what our legislators in the House and Senate should be doing right this very moment; focusing on the problems that got us in this mess and closing the loopholes which made it possible for predatory lending practices to occur at all.

Mortgage documents should be clear, concise and understandable. They must be fair and correct. To be anything less should put the lender, as opposed to the borrower, at risk. At some point people have got to become less agreeable to adding costs to their homeownership experience and stand up and say, if you intentionally try and screw me over and I can ultimately prove it, you are going to be held accountable for it. Enough said. This ridiculous extra inspection will only stick around if we, the consumer, is willing to bear it. I see no reasonable need for it. The law should be clear as well. It should be the only protection we need.

If the contract plays foul it should be moot. If that were the law and the lender was held to that, so would the need for an additional inspection, and additional cost, be moot.

7 comments:

mortgagemadness said...

I noticed you forgot to mention the most important fact of all about Mortgage Loan Inspection; you have never spoken to, or even met with them. If you would have, you may have mentioned in your blog that they provide necessary mortgage education to their clients, help them to make the right decision about the type of mortgage loan program they choose, or that they provide personal, one-on-one guidance and support throughout the entire mortgage loan process. You may have even mentioned the part about how they can save you thousands of dollars in excessive fees, inflated finance charges, title insurance premiums and closing costs. And if that’s not enough, there is the part about how they instruct you in ways to negotiate with the lender or bank for the lowest interest rate, best terms and protect you from predatory lenders and unethical lending practices.

To make it a little easier for you to understand what a Mortgage Loan Inspection is, it can be compared to having a home inspection done, but for your mortgage. Every Realtor will tell you the importance, protection and benefit a home inspection provides you. A professional home inspector looks for everything that is possible wrong with a property, they know what to look for. They also look for everything that is good and sound with a home. They give you an independent, unbiased opinion with the straight forward answers you need to know. It can tell you it has a good foundation, the electrical is up to par, and the shingles on the roof look to have another 15 years left on them before you have to replace them. The list goes on; in fact, the inspector provides you with a comprehensive report of the inspection results. With the information you now have at hand you can make an informed decision about whether or not you are still willing to purchase this home. Should you move on to a different home? Negotiate for a lower price? Or have the homeowner fix the problems the inspector found before you buy it. Information like this is worth every penny you pay for it. The cost for having a home inspection completed is around $300 to $400 on average.

Tell me, do you think it worth it to have a home inspection done? It is worth the money? Will it help to protect you? Does it provide you with the necessary information you need to make the right decision about buying that home? Does it give you the answers you are wondering about? It there any benefit to having an inspection?

The home inspection, therefore, accomplishes two goals. First it gives you peace of mind that the home you are about to purchase is in the good condition; or second, significant problems that are not evident to a buyer’s untrained eye, are discovered before the purchase is completed.

The Mortgage Loan Inspection provides the same service for the buyer’s new mortgage as the home inspection provides for the house itself.

Mortgage Loan Inspection does what no State or Federal Agency is able to do, step in and help protect the consumer before they close on a mortgage! Helping someone after the fact is just that – after the fact!

There are laws in place that are supposed to protect us. They fall short when it comes to stopping predatory lenders and unethical lending practices. They are designed to prosecute only after the damage has been done with little or no real action or consequences to those involved.

Getting a Mortgage Loan Inspection stops problems before they happen, isn’t stopping a problem before it happens a great idea? If the Government stepped in and got involved with reviewing loan paperwork, how much more would that cost you? Do you really think only $275? I think not, try $1000 or even higher. Who is going to pay for the new government employee’s? Who’s going to run the new agency? The same government agency letting the mortgage brokers and bankers off the hook now? Why don’t we let the CEO of Countrywide Mortgage or Washington Mutual Bank, 2 of the largest banks in the nation run the new agency. And how will you know if they are acting in your best interest and not theirs? Take my word on this – YOU NEED MORTGAGE LOAN INSPECTION!

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Abbie said...

I personally agree with what mortgagemadness has stated. Mortgage loan inspectors give everything that the potential homebuyers need to know. Since mortgage is one of the few biggest purchases we make in our lives, we absolutely need to make sure that everything will run smoothly and won't cause any future problems which are definitely more costly. My husband and I have secured an Alberta home loan months ago, and I can say that getting an expert in Alberta home mortgages is like investing in something which is very beneficial in the long run.

Indeed, it can be compared to a home inspector.

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takeshi007 said...

For me it is not a big deal if inspector inspect your mortgage loan because it is for the sake of your loan and also to secure that you have legal documents and papers to purchase a house.

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Randy Grimes said...

Both Jim and mortgagemadness make good points. In an idealized world, the average Joe wouldn't have to worry about getting fleeced when making the biggest purchase of their lives.

To Jim's point, The Dodd-Frank acted helped in this regard and has, in theory, curtailed the some of the most abusive practices (such as yield spread premiums). Despite this, enforcement is questionable and abuses still occur. Even within the framework of the law, the costs of a mortgage or refinance can vary by many thousands depending on the lender and originator, both of which are happy to tell the unassuming consumer what a great deal their getting.

It is true that consumers can protect themselves by learning about mortgages and aggressively shopping for a loan, but that's not for everyone. I founded HomeLoanInspectors to give consumers a way to protect themselves without having to invest huge amounts of time learning the ins and outs of mortgages.

To me its another choice: you can roll the dice that your lender is a "good guy", invest a lot of time and effort, or have someone who knows what to look for give you some help. Simple as that.