Mortgage Lending In A Cooling Economy

The housing market is now cooling down. Those who have bought homes in the past few years will likely see their value decrease. Those who are looking to buy a home now may see cheaper prices but higher interest rates.

If a person is buying a home, they likely don’t have enough cash saved up to pay the full price. Therefore, like most home buyers, they will need a mortgage.

Even if they have had a mortgage before, they will likely have questions about the process. They may need advice about which option to choose. What type of mortgage will be best in the long run?

The most common type of home loan is the 30-year mortgage. Usually it has a fixed rate, but there are situations in which a mortgage lender may offer an adjustable rate mortgage.  The nice thing about these mortgages is that they start off with low payments. However, if interest rates go up – which they usually do – then the buyer is stuck with higher payments. What this means is that the usual payment of $1,500 a month may suddenly double to $3,000 a month. Is that an increase that the average home buyer can afford?

Most likely not, which is why they will probably ask the mortgage lender for their advice. And here’s what they may say: “Don’t worry about the rate adjustment — you can just sell or refinance your home before the rate increases.” The lender assures the buyer that their home will increase in value, making a refinance easy.

But how will they know when the rate will increase? It’s not like we can predict these sorts of things. And what if they don’t want to sell your home? Or maybe they won’t be able to even qualify for a refinance by then if something happens, such as they lose their job or their credit score tanks.

But in the end, even if you as a mortgage lender gave a client bad advice, that does not excuse them from their loan commitment. Even if their home depreciates in value or goes into foreclosure because they can’t keep up with the payments, there’s not much recourse for them.

The client can claim that you committed fraud, but did you really? You didn’t make any guarantees; you just gave your opinion. In fact, cases like this have gone to court and judges have ruled in favor of the mortgage lender, claiming that their forecast of the home’s value was mere speculation. It was not a known fact and should not have been considered reliable information. 

Keep Your License With Help From a Tampa Mortgage Lenders Licensing Lawyer

Mortgage lenders often give potential clients advice about the market in order to help them make decisions about home loans and refinancing. However, if a client takes their advice to heart and the advice is incorrect, it can lead to foreclosures and more.

A mortgage lender’s actions can lead to licensing issues. A Tampa mortgage lenders licensing lawyer from The Law Offices of David P. Rankin, P.A. can help resolve them. Schedule a consultation today by filling out the online form or calling (813) 968-6633.

Source:

journal.firsttuesday.us/advising-clients-through-a-cooling-real-estate-market/86743/