Sep 10 2007
Colorado Net Benefit Disclosure
The new Colorado laws that I discussed on September 1, 2007 have spawned the first of many new disclosures to come. The Colorado Tangible Net Benefit Disclosure states that it is the duty of the mortgage broker not to recommend or induce a borrower to enter into a transaction that does not have a reasonable, tangible net benefit to the borrower. All in all this is a pretty good form, it is worth a read.
The question I have is does this really protect the consumer from the mess we are in now?
The new loan will enable me to buy a home. How many people did we put in homes that really should have waited?
The proceeds of the new loan will be used for purposes that are of such importance to me that I am willing to obtain a new loan, even if that loan has terms that may not be as favorable as my existing loan. Examples include, but are not limited to: medical expenses; home improvements; avoid foreclosure; or to pay educational expenses. How about going to The Leadbetter golf academy? Of course that would be under home improvement.
You would think that the spirit of this form or the spirit of the law that created this form would keep you from going from a fixed loan to a negative amortization loan so I could get cash out to do something stupid. But the truth is if you check the appropriate boxes you can do just that.
It’s unfortunate that there needs to be a written law that tells lenders to protect their buyers. However, given the past year and what’s to come, the fact that so many lenders are going out of business because they did not counsel their clients appropriately is impressive. The communication between the lender, their client and the client’s realtor, must be open to the pitfalls that accompany a purchase and be working toward a common goal. Hopefully, the new laws being put into place will enhance this relationship and provide a worthwhile outcome to the person(s) we care about most, our clients.