Keys Homes
Sunday, October 20, 2013
The give and take of loans

By REGINA CORCORAN Citizen Columnist

Most legislators are not financial experts. Most have little more experience with real estate mortgages than you do. It would be rare to find a legislator with as much loan experience as me, because then, he or she would be a loan officer, not a legislator.

So, it's difficult for government representatives to create laws that accurately and concisely cure mortgage lending problems. Sometimes their attempts resemble spraying the abusive lenders with machine gun fire, rather than a surgeon removing the crud, and only the crud, with a single stroke of a blade.

The automatic weapon approach can kill or injure lots of innocent bystanders. The scalpel is precise, but comes with decades of education, training and experience in the real estate and mortgage fields.

It's critical for legislators to tune in to specialists in the field of real estate lending. Otherwise, their legislation may be successful in stifling some predatory lenders and some mortgage fraud. Unfortunately, many consumers may suffer damages when loans they need aren't available anymore. Those trying to protect consumers end up turning them away because the mortgage process becomes so complicated and unwieldy.

Predatory loans is the inflammatory term for sub-prime lending: the loans for borrowers and/or properties that are a little ragged around the edges.

We generally associate these loans with mortgage brokers. Surprisingly, according to an Internet article written by the Community Reinvestment Association of North Carolina, Bank of America was once reported to be the largest subprime lender in the United States.

Guess who owned the Money Store? No, it's not Jim Palmer. The former First Union Bank.

Already enacted North Carolina legislation, as well as proposed federal and state legislation, contain terms that may well come back with a bite when you least suspect it. Consider these recommendations. No negative amortization. Well of course, you say. We can't have a loan balance that can grow larger.

What about as a "work out" situation? Suppose the borrower gets behind and the lender agrees to add the interest due onto the end? If you prohibit that, the homeowners may have to turn the house in as they have no method of catching up.

Mandatory limits on debt to income ratios. Some proposed laws want to prohibit loans where borrowers are using more than 50 percent of their income for all their debts. Imagine borrowers who have run up high credit card debts. If they continue to pay only the minimum required payments, they probably can never pay off those balances. Still, the new legislation might prevent them from refinancing their home to get a lower rate, lower monthly payments, and the ability to get out of debt. If the resulting ratios were over 50 percent, they couldn't get the loan they desperately need.

Some of the legislation is even at war with itself. How did a four-page long Good Faith Estimate make the loan process clearer or simpler for the borrower?

Contact your legislators. Let them know you are adult enough to answer two simple questions for yourself before taking a loan. What am I getting? What do I have to give for it?

For addresses to reach your federal and state legislators, go to: www.billnelson.senate.gov/contact/index.cfm and www.rubio.senate.gov/public/index.cfm/contact and http://www.house.gov/representatives/#state_fl and look for the link for Joe Garcia

What do you think?

Regina E. Corcoran, SRA, is a Florida real estate broker, state-certified residential appraiser and residential contractor. She is president of AmeriRealty Corp. and vice president of AmeriMortgage Corp. She can be reached at ReginaECorcoran@cs.com. Corcoran writes her column exclusively for The Citizen. It appears every other Sunday.

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