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Mortgage lender woes? Where to get help

In the fallout of the subprime lending crisis, state regulators have been getting an increasing number of calls from homeowners with complaints about mortgage bankers and mortgage brokers.

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Regulators say borrowers are reporting problems that include interest rate hikes higher than they expected, late payment notices borrowers say are incorrect and disputes over whether loan contracts properly disclosed all fees.

According to Mark Canning, senior management analyst with the Florida Office of Financial Regulation, some consumers say they have applied for certain types of loans, such as 30-year fixed loans, but do not find out until closing that the brokers have found them another type of loan.

In these cases, many consumers feel trapped into taking what they are offered.

In other cases, consumers say brokers did not tell them a deposit is not fully refundable -- although that term is part of the contract -- until after a loan application has been rejected.

"The real problem often is failure by the lender to communicate with the consumer," he says.

Homeowners often don't know where to turn for help when they have problems with their lenders. This is especially true because many of the adjustable-rate mortgages with teaser rates, subprime loans and other mortgages now in foreclosure or facing foreclosure originated with nonbank lenders, including some that failed in 2007.

Two of the largest nonbank subprime lenders to fail were New Century Financial Corp. and American Home Mortgage. Last year, both stopped making mortgages and filed for Chapter 11 bankruptcy protection.

Whom do you call?
Homeowners experiencing problems with their lenders can find the who-regulates-who system confusing.

The answer depends on whether the lender is a federally regulated and insured commercial bank or savings bank, or if it is a state-regulated mortgage company that is not affiliated with one of those banks.

Who regulates my lender?

Lenders feel the heat
Last year, several states passed tougher laws and regulations on mortgage lending, including licensing of mortgage lenders, and on information they must provide to borrowers during loan closings. Many states also passed laws that raised the fines lenders pay for some mortgage frauds.

State regulators are taking steps they say will improve their systems for sharing information on nonbank mortgage lenders, which will ultimately benefit the borrowers by weeding out questionable lenders.

The biggest change is a new, standardized Internet-based system for licensing nonbank mortgage lenders and their loan officers, called the Nationwide Mortgage Licensing System, or NMLS. It makes it faster and easier for regulators to find information about mortgage lenders' history and operations in other states.

The Conference of State Bank Supervisors and the Washington-based American Association of Residential Mortgage Regulators launched the NMLS for regulators Jan. 2.

Though not yet available for consumers, Amy Greenwood-Field, review examiner for the Nebraska Department of Banking and Finance, says the system will help state regulators screen companies that apply for mortgage lending licenses. "It will be easier to obtain information and data from other states and find out where there have been problems."

Bankrate.com's corrections policy
-- Updated: April 17, 2008
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