RHI encourages all home buyers to seek homebuyer’s counseling, or at least a second opinion from an organization or agency with experience in affordable housing issues, before they enter into a high interest rate mortgage loan. While a so-called “subprime” loan may be beneficial to some consumers, unfortunately many such loans contain features that make them abusive and can place the consumer in a debt trap that can result in the loss of their home.

RHI recommends than consumers exercise special caution before agreeing to a mortgage on their residence that contains any of the following features:

• The loan has an interest rate higher than the current average mortgage rate if they have good credit, or 3 points above the current prime rate if they have poor credit.

• The loan includes points and fees that add up to more than 4 percent of the loan total.

• The loan contains any type of “credit insurance” that is rolled into the loan and financed.

• The loan contains a pre-payment penalty if the borrower refinances.

• The loan contains a “call” or ‘balloon payment” provision that renders the entire amount due before 15 years.

• The lender is unwilling to give the borrower a “Good Faith Estimate” of the projected loan costs that the borrower can take home before signing the loan, or if the actual fees on the final document differ significantly from the Good Faith Estimate.

• The lender attempts to get the borrower to sign documents without reading or understanding them, or asks the borrower to sign documents with false information, or asks the borrower to backdate any documents.

• The lender attempts to pressure the borrower to sign documents quickly.
 
SEE ALSO:  predatory-lending