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Risk Based Mortgage Pricing To Be Revealed
In an important move, borrowers will know if their credit score impacted their mortgage rate.
The FTC and Federal Reserve want consumers to be informed if they’re receiving higher interest rates as a result of their credit history. Beginning in 2011 (no, not 2010), consumers will be notified if they receive less favorable terms on their mortgages because of credit imperfections, according to a notice from the Federal Reserve and FTC.
Consumers with less-than-stellar credit will receive “risk-based pricing” notices when applying for mortgages and other types of loans, assuming their credit scores adversely affect the terms and/or interest rate they ultimately receive.
If you’re subject to risked-based pricing, the borrower will also have access to a free credit report so you can determine what negative information pushed your rate up. And more importantly, if it’s accurate.
It seems like a good way to empower consumers who often don’t know why they’re receiving interest rates significantly higher than those advertised on TV or the Internet.
Having a better understanding of how your mortgage broker or loan officer came up with your interest rate is definitely a positive for mortgage shoppers, and should make the process all the more transparent.
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