Friday, December 15, 2006

Builders put pressure on buyers to use their title company.

Here's an example. I couldn't figure out how to register to comment on this post, so here are my two cents. ;)

I agree that the loan offered by Wells Fargo is not unusual in today's market and I wouldn't consider it predatory lending. Most predatory lending occurs in a brokered transaction. The focus of predatory practices is in the total fees earned per transaction and the total is regulated. We've seen transactions re-structured just before closing because the mortgage lender determined that the mortgage broker was earning more than permitted under federal law.

You are right to be cautious about overextending yourself. I have been in the business for a long time and as a former mortgage loan underwriter, I am surprised at the level of risk both consumers and lenders are assuming. Unless you truly want to be "house poor", the good old fashioned 28/36 ratios are where most families will thrive.

Spec homes are high risk commerical mortgage lending. Builders and mortgage lenders do NOT engage in such speculation to keep workers busy. Far from it. They have gambled that they will be able to move the houses at profit.

The two issues in the post that DO concern me are the deposit retained by the builder and the attempt to force use of affiliated businesses.

The builder may have a legitimate right to retain the deposit. I would pursue the matter until that's determined one way or the other. Of course, if $1000 isn't worth your time, don't bother.

RESPA expressly prohibits required use of affiliated business arrangements - ABAs. The builder should have disclosed the relationships in writing in a special RESPA disclosure and BACKED OFF when you chose to go somewhere else.

Shopping for price and service are the powers - significant powers - held in the hands of consumers. Think for yourself. Keep your head. Real estate transactions involve a lot of money and emotion. That's a heady mix. Yes, buyer beware, but don't give up. There are plenty of honest builders, mortgage lenders, and title insurance agents who will help you find your new home.

1 comment:

Diane Cipa, The Closing Specialists® said...

Thank you, consumerist, for the fast response to my e-mail. I'm impressed and registered.