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Group to Police Lender Overcharges

Group to Police Lender OverchargesNational Mortgage Complaint Center to help borrowers avoid overcharges

February 15, 2005


Most borrowers are paying too much on their loans because of dishonest lenders and brokers, according to a homeowner watchdog group that has launched a mortgage document examination and audit service to advise borrowers whether they are being cheated.

The provider of such services will be the National Mortgage Complaint Center, which announced it will team up with “honest” property management firms or real estate firms as these often make lifelong friends by protecting borrowers from being “overcharged or defrauded by a greedy mortgage lender.”

“There simply is no accountability on the part of many mortgage lenders, and the borrower simply has no place to go for a second opinion or an examination of mortgage documents prior to a homeowner actually financing or refinancing their home,” said survey author M. Thomas Martin in the announcement. “The average homeowner or the new home purchaser has no chance against greedy mortgage lenders intent on lining their pockets with the ill-gotten proceeds.”

The complaint center, which describes itself as “America’s Watchdog for homeowners,” said that it conducted a yearlong national survey of mortgage lenders in 2004 to determine national fee standards and or fee averages for consumers on the verge of refinancing or purchasing a home loan. The results of the survey were “grim” — as widespread fraud amongst lenders was discovered.

The center found many consumers were being cheated and bilked, prompting another survey of the same lenders which examined their just completed mortgage transactions in 2005 to see if the situation had improved for consumers.

The second survey revealed no improvements.

Because so many new lenders and brokers in the market are chasing fewer refinances, most had increased fees to borrowers or not explained that higher rates were due to yield spread premiums paid to the lender, the Seattle-headquartered center said.

The updated survey reportedly showed that the average borrower pays $1250 more in closing costs than would be considered fair market prices and may pay $29,000 more in interest-related charges on a typical 30-year mortgage. It also revealed that the majority of borrowers did not receive the required Truth in Lending or Good Faith Estimates three business days after completing the 1003 application.

“Another huge problem,” the center said, is that borrowers were found to get stuck with a prepayment penalty even though they were told there would not be one.

In other cases, the loans had unnecessary junk fees tacked on.

The net result is that 55 to 60 million, or about five out of six, borrowers were overcharged or cheated when they purchased or refinanced their home — and, in most cases they continue to get cheated by paying a higher interest rate or mortgage balance each month, according to Martin.

Although the federal government and most states have consumer protection laws, “there is little or no enforcement on the part of government officials,” the center reported.

“Homeowners should not expect much help from their elected state or federal officials because the biggest contributors to state or federal legislative committees assigned to oversight of banking or mortgage activities are in fact mortgage companies or banks,” Martin said.

“Its kind of like the fox guarding the chicken coup — kind of hard to get any consumer protection from elected leaders when they have been bought off by the very industry they are supposed to be watching,” he concluded.

Coco Salazar is an assistant editor and staff writer for

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