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.