Will more information reduce mortgage borrowing?

Home sales in the Chicago neighborhoods where a new law requires borrowers with low credit scores to complete financial counseling prior to obtaining mortgages have plummeted 45 percent since its implementation, and Mobium Mortgage’s Dan Green says sales fell in neighboring ZIP codes as well.

While some contend that the rule discriminates against borrowers in these ZIP codes, others believe it will curtail predatory lending by helping borrowers understand the terms of their mortgages. “I think the drop in sales is temporary,” speculates Brenda Grauer of Housing Action Illinois.

“The only thing that’s changed is there’s a transparency to the process. This doesn’t prevent anybody from getting a loan.” There also are concerns, however, that some lenders have stopped making loans in these neighborhoods due to the added paperwork.

For mortgage basics click here.

Comments are closed.