This latest settlement is a reminder to consumers to keep a close eye on the fine print in their loan origination paperwork, whether they’re borrowing for a home or a car.
For instance, when you apply for a mortgage, the lender may offer you a “rate lock” for 30 to 45 days, meaning that your interest rate is guaranteed for that period.
Unforeseen circumstances can stretch out the home buying process beyond that time frame, meaning that you’ll lose the guaranteed rate. You may have to pony up a fee — perhaps as much as 1 percent of your loan amount — in order to lock in your rate for a longer time.
“Consumers have a lot of rights, and lenders should disclose what they charge,” said Debbie Goldstein, executive vice president at the Center for Responsible Lending.
Here are three suggestions for prospective borrowers.
1. Shop around: Don’t take the first offer that comes your way.
“Understand the interest rate that you qualify for and ask other mortgage lenders about the fees they charge on the loans,” said Goldstein. “Have a sense of comparison of what the appropriate fees and rates are when you finalize.”
2. Review your disclosures: For mortgages, the CFPB developed two forms — the loan estimate and the closing disclosure — to give borrowers a bird’s eye view of their loan amount, interest rate, monthly payments and closing costs.
3. Keep asking questions: The most important question in the loan process is, “why?” If you don’t understand something in the course of applying for a loan, ask your broker to clarify.
“Make sure that the individual you’re working with is willing to help you understand what you’re signing,” said Lauren H. Mattia, founder of Women’s Money Empowerment Network in Sarasota, Florida.
“Read the documents that you sign and the statements that you get in the mail,” she said. “Pay attention because things happen, sometimes even inadvertently.”