Constant Fluctuations in the Mortgage Market

There are continuous fluctuations in the mortgage market this summer following an 8 percent increase in the lending between the months of June and July.

Based on the data from the Council of Mortgage Lenders (CML), the loans for home buyers and remortgages increase to £12.7 billion in July, which is it’s a record high since September and is up by 2 percent in the same period of the previous year.

The overall market was generally invariable, although the lending figures fluctuated due to distortions brought about by one-off events, like the Olympics and the Diamond Jubilee.

Meanwhile, according to CML, they still cannot confirm whether or not the recently released £80 billion Funding for Lending plan has motivated banks to lend more to hopeful homeowners.

Caroline Purdey, CML market and data analyst, said that they are looking forward to September figures because the effects of the Olympics and Diamond Jubilee are already insignificant.

However, Mark Harris, the chief executive of SPF Private Clients, cautioned that any constant recovery in the housing market is still a long way to go. Moreover, Harris said that the ongoing eurozone crisis, the focus on Olympics, and the low consumer confidence might lead to a slight decrease in transactions over the next two months.

In the past few weeks, there have been several inexpensive five-year fixed-rate deals released. This has been considered as an answer to the Treasury and Bank of England’s lending scheme. Its objective is to improve the economy by allowing credit to flow to home owners and businesses.

Earlier, a lot of homeowners had been glad to remain on their lender’s standard variable rates after mortgage deals expire. However, remortgaging is currently anticipated to increase. Moreover, the deals have been mostly intended at borrowers who can pay huge down payments and there are doubts that the scheme will not succeed in improving lending to first-time buyers.

Online Payday Loan Scams

Center for Responsible Lending and the Pew Charitable Trusts have been avid in fighting against abusive and illegal activities done by payday loan stores across various counties. Payday lenders in California who have been charging high-cost loans at storefronts for years are now going to be subject to new laws from the state’s financial regulators.

According to the financial regulators of California, they found out though online complaints that several of the payday lenders did not have legal rights or license to be operative in the area. Furthermore, these stores and lenders do not follow consumer-protection laws and other regulations.

Through a website, the California Department of Corporations has discovered that many short-term lenders that are operative online do not show their annual percentage rate figures. This APR, the standard for measuring the true cost of loans is made mandatory by both federal and state law.

In payday loans, borrowers tend to pay their debts through their paycheck or if that would not suffice the whole debt then they has to take out another payday loan from a different lender. This is what consumers would often call a payday loan trap because once they get a payday loan debt it is not very easy to get rid of it.

California’s law has placed a limit of a payday loan in a day. The largest amount that can be borrowed is $300 with a 15% interest. It operates in an annual percent rage that is 13 times more expensive than credit cards. Online payday lenders would ask their borrowers to share personal data that include their bank account information. There are some lenders who would deposit money on the accounts before the customers get a loan and then they take off money from the bank for refund. This has led some customers to close their bank accounts and even take legal actions through court.

Scammers Use Aggression to Scare Consumers

On the beginning of the year, the Federal Trade Commission was able to bust a scam in the payday loaning industry that involved Indians calling and harassing customers at home and at work to pay debts that they do not even owe. The operations were closed and the estimated damages of the scam amounted up to $5 million dollars.

The callers threatened to have the individual arrested if they do not pay their due loans; they even call their friends and relatives. One of the viewers of CBS4 has received one of these harassing calls and called the attention of the 4 On Your Side Consumer Investigator Jodi Brooks.

The scammers are using threat and aggression to scare people to paying bills that they often do not acknowledge. One customer, Shameca Farris was a victim of these phone calls. She shares that she felt violated for receiving such calls in her work place and receiving threatening messages in her personal phone. The caller insisted she had a payday loan that she owed, but she clearly knew that she did not.

She shares that they demanded $600 so that the issue will stop and they would not have to call her and demand from her again. The caller even threatened her of arrest if she did not pay up. According to Farris they are using embarrassment to get what they want. She was scared at first with the threats but later on she realized that they were nothing but empty.

According to the Denver District Attorney’s Office, though the threats may sound scary and overwhelming, these are nothing but a scam. Lies that their office would hear very often through complaints from consumers; also according to them the law does not state that a person can be arrested for non-payment of debt.

The scammers would say that they are from the American Legal Services or other similar legal agencies, however according to the authorities such agency does not exist. In fact, the company name is now the name of a scam alert in the net.

FICO Scores Too Traditional Says Digital Risk

Many consumers would feel that their FICO scores are not very accurate in showing their capabilities in handlinga mortgage loan. In fact, experts from the Digital Risk believe that one’s FICO score alone is not capable of showing just how capable a person is in his financials.

All those who have a FICO score of 690 or better then you know that you can get any loan you want. Sometimes it can be pretty unfair how lending institutions seem to be very reliant on the scores in approving loans.

According to Digital Risk FICO scores have been unsuccessful in predicting the right amount of mortgages for clients for years. Many customers and critics believe that the financial institutions must find another way to measure the capability of individuals to pay for mortgages. Credit histories could be both misjudging and unfair.

According to Peter Kassaboy, the chairman and chief executive of Digital Risk, the industry is only relying on methods that are no longer up to date and risky. FICO high scorers tend to depend on their high scores to get cheaper and better deals than those who had already fallen into the Bad Credit category.

In a study conducted in 2009, the findings reveal 588,000 homeowners having to leave their houses in 2008. This marks 18% of the total economic downfall that occurred in the financial industry during the depression. The creator of the FICO score, Fair Issac, defends that the tool allows the lenders to determine if an individual will be capable of paying through measuring their credit and history and one disadvantage of the system is the strategic defaults it imposes on those with different scores.

However, Digital Risk says that strategic default is not the only problem. The company has introduced a system which they call the “Veritas” it is capable of determining the credit characteristics of clients. This is a tool that measures the behavior of a borrower despite his credit FICO score. It will provide lenders with the idea of how a borrower will be acting when he takes on a loan.

New Rules for the Good of Consumers Says U.S. Consumer Agency

It is vital that consumers should be able to find the right kind of lenders to have the perfect deal for their personal loans. The United States consumer protection agency has realized this importance and has found a way to make it easier for consumers to compare mortgage deals.

Mortgages come with different deals according to the Consumer Financial Protection Bureau; these fees have different arrangements when it comes to the amount of promo points and fees you can have to reduce your loan’s interest rate. These deals are what make it very difficult for consumers to compare the loans of the different financial agencies.

In the proposed law of the U.S. consumer agency, the mortgage lenders could still offer the promos and fees to clients; however they must show the amount of the loan without the fees and the points.

According to Richard Cordray, director of the CFPB, they want to give customers the best and so it is a must that lenders should provide their deal and give the customer the option to easily choose their own loans.

The new rules that are expected to be followed next year exempt the provision in the 2010 Dodd-Frank financial oversight law. Debtors are allowed to have the decision in taking a mortgage without the fees and points that lenders offer with it.

Regulators are currently soliciting advice on how to make sure that customers will be able to fairly choose deal payments. The mortgage business has been criticized for approving loans for individuals who cannot afford them; this had a great contribution to the economic crisis of the country in 2007 to 2009.

The privilege of presenting and offering customers loans with unjust terms are often within the loan officers and brokers. Also, the qualifications and the standards for loans are different among individuals. The CFPB however, is confident that the new rules that they are proposing to adapt is going to take care of these problems.