Customers' Homes At Risk Due To Bad Advice

The Citizens Advice Bureau (CAB) has issued a report which has shown that hundreds of thousands of Britons are falling further into debt, ending up in court and facing the repossession of their homes due to irresponsible lending practices, inaccurate advice and in some cases, downright fraud.



The CAB's report; Set Up To Fail: CAB Clients Experience of Mortgage and Secured Loan Arrears Problems (December 2007) has revealed that some mortgage brokers are issuing loans, named aptly 'liar loans' or self certification loans, to people with inadequate credit ratings and poor financial acumen, without them having to prove their incomes.



Many people interviewed in the report said that they completely relied on the broker to guide and advise, and most of them were not told the severity of the consequences they would face is they fell behind with payments. As well as criticising brokers, the report says that the regulatory authorities and Labour government are not doing enough to protect vulnerable home owners from such scams.



The chief executive of CAB, David Harker said: "The cavalier behaviour of some brokers and sub-prime lenders is seriously undermining home ownership and hitting the most vulnerable borrowers hardest.



Our research suggests that many aspiring homeowners have been mis-sold unsuitable and costly home loans that are doomed to fail from the start.



"Many sub-prime lenders are flouting the rules on responsible lending by granting loans when it's clear the borrower will not be able to afford to repay it from the very outset, then getting tough immediately things go wrong. Far from providing housing security and a valuable asset, home ownership has proved a fast track to debt and homelessness for many vulnerable borrowers on low incomes.



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The report from the CAB was based on a case study of 1,200 customers from 360 advice centres nationwide, the organisation was involved in 57,000 cases of mortgage and secured loan arrears from 2006-2007. The CAB also said that as many as 770,000 people had missed at least one secured loan or mortgage payment in the previous year. Brokers sell secured loans through purchasing secured loan leads from other companies or following up leads from their own websites.



Another revelation made by the CAB report is that the number of rejections for secured loans from high street banks and mortgage lenders is rising, this is resulting in people seeking credit with other, less reputable companies.



Mortgage payments of one kind or another, are claiming more and more of people's monthly income. A third of people involved in CAB's study paid more than 50% of their income in mortgage and secured loan payment, and for 12% the repayments amounted 70% of their salary.



Recent months have seen a huge increase in house possessions, this is partially due to the credit crunch and house price slumps alongside rising interest rates. The Council of Mortgage Lenders (CML) reported a 75% rise in house possessions last year to the staggering figure of 30,000.



The many difficulties faces by homeowners is reflected in the recent growth of the debt collection industry which has quadrupled in size since 2003.



This evidence shows that "homeowners in a financially and emotionally vulnerable situation end up selling their houses for less than they are worth, in return for a tenancy that offers little security of tenure.



" Shelter, a UK housing charity, is cited in the report, highlighting that people are increasingly using credit cards to pay their rent or mortgage.



Shelter's chief executive, Adam Sampson, said: "Clearly, this is a huge problem which will only become more widespread as housing costs continue to rise. We would urge anyone struggling with the cost of their mortgage or rent to seek independent financial advice. The number of people hit by the credit crunch, interest rate hikes and unaffordable housing costs are rapidly rising.



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SDS Applications Ltd Continues Expansion of Web-Enabled Solutions for Packagers

SDS Applications Ltd, a leading provider of mortgage processing technology, today announced that The Finance Centre is to use the โ€˜SDS Maps' software for its mortgage application processing.







Based in Warrington, The Finance Centre is one of the UK's largest dedicated sub-prime packaging companies and has been delivering sub-prime deals for over 12 years.







โ€œThe Finance Centre is committed to providing the highest quality service to brokers and technology is an integral part of our service proposition.



โ€ said Wayne Smethurst, partner of The Finance Centre. โ€œWe selected โ€˜SDS Maps' because of the wide range of cutting-edge technology that it provides, which will enable us to ensure service excellence well into the future. By creating an automated solution for quotations, illustrations, application entry, tracking and processing, โ€˜SDS Maps' provides us with a springboard to continuous improvement in how we meet our introducers' needs."







'SDS Maps' provides an end-to-end solution for automating the entire mortgage pre-completion process.



The system features workflow & task management, status tracking, document production, powerful system maintenance facilities and on-line support services.







โ€˜SDS Maps' will allow introducers in any location to access the system through a browser interface. Introducers will be able to see all their cases in a summary view, begin online mortgage applications, create illustrations online and submit applications for processing. Because the system is 100% browser-based, there is no software to install.



Introducers just point their browser to the appropriate web address and begin using the new functionality.







โ€œWe are delighted that The Finance Centre has selected the โ€˜SDS Maps' system. It's a great fit with their business goals of increasing new business whilst improving customer service and lowering overall costsโ€, said Barry Yager, SDS's Commercial Director.







The application is currently in the user-testing phase and is due to go live at the end of May.















About The Finance Centre







The Finance Centre was established by Wayne Smethurst in 1991, as a secured loans brokerage.



In 1996 the business entered the mortgage packaging market and Wayne was joined by fellow partners Andrew Brown and Ron Taylor in 1998.







The Finance Centre has focussed on the sub-prime mortgage market and now provides a nationwide packaging service to brokers throughout the UK. During the past year The Finance Centre has trebled its turnover and has ambitious plans for continued rapid growth in the future. The Finance Centre is one of the few mortgage packagers to receive ISO 9001 Quality Accreditation.



The business is based in Warrington.







About SDS Applications Ltd



SDS Applications Ltd is considered one of the mortgage industry's foremost providers of mortgage lending software solutions. The company offers an integrated suite of mortgage processing solutions for lenders and mortgage packagers.



SDS MAPS is now used extensively throughout packaging community and is fast becoming the โ€˜industry standard'. SDS clients include The Finance Centre, Solent Mortgage Services, County Mortgages Group, The Mortgage Operation (TMO), Enterprise Homeloans, GMAC RFC and several regional building societies, with implementations at more leading companies to be announced over the coming months.



--- ENDS ---







For further information please contact:







Justin Belcher







SDS Applications Ltd





Tel: 01494 778863



press@sdsapps.co.uk







Or visit the Internet site at www.mortgage-systems.com

Save Money on Your Mortgage Loan

Did you know if you borrow $100,000 for a mortgage loan, you may pay back as much as $300,000? Yes, its true, and you may pay more than that depending on the interest rate and the number of years it takes you to repay the loan. The amount is even higher if the terms of your loan require mortgage insurance.







There is a solution if you are able to pay something extra each month even if it is a small amount. Let's say you borrowed $100,000 and for your first payment, you paid the regular monthly payment of principal and interest in the amount of $825.



00. As a reasonable example early in the term of the loan, $800 may be applied to interest and $25.00 is applied as principal. Your outstanding balance is now reduced to $99,975.00 and the interest for the next payment is calculated on that amount. If you had paid an extra $50.00 with the payment, the $50.00 would have paid two more scheduled principal payments and you would have saved two interest payments. Using the above figures as an example you would have saved approximately $1,600.00. That's right - $1,600 in interest that you would never have to pay.



In addition the interest amount due next month would be calculated on a lower balance.







The terms of the mortgage require a monthly payment of the full amount due for the monthly principal and interest payment. Most mortgage documents allow additional principal payments (also known as curtailments) without penalty; however, you should verify this with the lender or review the loan documents. If there are no penalties, you can save several thousand dollars over the term of the loan plus you don't have to spend thirty years paying off your loan.



As we saw with the example above, a payment of an extra $50.00 resulted in savings in the interest. (The actual amount will vary depending on the loan amount and interest rate.)







The earlier you start paying additional sums during the life of the loan, the better. In the early years, the largest portion of your payment is applied as interest with a small amount going to the principal balance. Those small amounts will be easier to pay as additional principal payments and you will see substantial savings in the interest payments that you will never have to pay.



As the balance is reduced the scheduled interest payments will be lower as the interest payment is calculated on the outstanding principal balance.







The principal balance will slowly start decreasing and before you know it, you will see a substantial reduction. It would be a good idea to ask your Lender to send you an amortization schedule so you can track your savings. This schedule shows the breakdown of the amount due for principal and the amount due for interest each month.







By reducing your principal balance faster than scheduled you will be able to request cancellation of your mortgage insurance, (MI or PMI) if your loan has insurance.



Lenders require this insurance on loans with a loan to value ratio (LTV) of 80% or more. As your principal balance declines, the LTV will decline quickly as well. The Lender should be contacted for more information on canceling mortgage insurance as early cancellation could save you a substantial sum. This is in addition to the interest savings.







So remember, if you want to save money on your mortgage loan, check your loan documents for any restrictions, request an amortization schedule, and ask about the requirements for cancellation of mortgage insurance.



Enjoy Your Savings

Advantages And Disadvantages Of Adjustable Rate Mortgages

When consumers begin shopping for a home loan they are often presented with the option of using an adjustable rate mortgage. An adjustable rate mortgage (also known as an ARM) can be a great way to buy a home but it can also be a horrible mistake that can lead to foreclosure or even bankruptcy. The difference between joy and disaster is often in the mortgage contract itself.



When consumers hear the term "adjustable rate mortgage" they should understand that this is a very broad term indeed, and that it can mean many things.



There are, literally, dozens of varieties of ARM's available to home shoppers, and knowing the good ones from the bad ones should be a home buyer's first concern.



In general, an adjustable rate mortgage begins with a set rate of interest for a specific length of time. This first rate is usually lower than what consumers can find in the fixed rate market at the same time. This lower rate is the inducement to take the ARM over the fixed rate products.



At some point in time, and this will be spelled out in the contract, the lower rate will be adjusted.



The adjustment can go up or down, but normally goes up, as you might expect. The factors that determine how much the rate goes up (or down) are many and vary from one lender to another. They also vary depending on the level of the mortgage. In other words, an adjustable rate mortgage that is also considered a sub-prime loan may have a huge increase in rate (along with increases in fees and service charges) which can make the new monthly payment difficult to pay.



Prime loans, on the other hand, which are more traditional in nature and are considered less risky by lenders, usually have caps on the amount of increase that is allowable for any one increase. This helps home owners (at least to some degree) to better understand what the max payment might be for their home at any given time in the future. In a very real sense it voids the "sky is the limit" possibility.



The only way to know if a particular adjustable rate mortgage is right for you and your budget is to sit down and read the contract slowly and carefully.



You may notice some odd-looking numbers such as 1/3, 2/7, or 1/10. The actual numbers you see may vary according to the contract you are looking at, but, in essence, they mean that the introductory interest rate will last for the first number in the term. In the case of 1/3, that means that for one year you pay the lower interest rate and an adjustment takes places and will continue to take place every three years afterward. A 2/7 would mean you get the first rate for two years, then an adjustment takes place and another adjustment will take place every seven years after.



An adjustable rate mortgage can be confusing even for the most intelligent of people. If you have any questions about the contract you should ask the lender or an attorney that you trust. The time to have these questions cleared up is before you sign the contract.