Risk Based Mortgage Pricing To Be Revealed

Services for Real Estate Pros with Paul Warkow-D.G. Weber Law Associates

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.

Comments (4)

David Monsour
Keller Williams Keystone Realty - Gettysburg, PA
ABR - www.realty-insights.com

Good information.  A lot of people don't understand credit scores and why they are so important.  It will certainly help someone shopping for a mortgage.

Dec 29, 2009 05:00 AM
Michael Gordon - Colorado Springs Mortgage Lender
Peoples Mortgage Corporation - Colorado Springs, CO

Paul, while I agree this information is usefull to borrowers, do we really need another disclosure? The Mortgage Professionals I know will discuss the impact of credit scores with the borrower up front as part of the education process.

Dec 29, 2009 05:08 AM
Paul Warkow
Paul Warkow-D.G. Weber Law Associates - Hauppauge, NY

David-I agree that this information is very helpful

Michael-Although usually I would agree that another disclosure is overkill, I think this information will let a borrower know exactly how much the credit score is costing.  The notice does not say who is obligated to provide the disclosure.

Dec 29, 2009 06:19 AM
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Jan 21, 2010 01:46 AM