| Mortgage insurers agree to refunds
Consumers who bought expensive insurance to cover a loan or mortgage and were refused a refund if they cancelled the policy received good news today from the City regulator. The Financial Services Authority (FSA) said insurers had agreed to alter their terms on single premium payment protection insurance (PPI), where customers pay a single upfront fee for cover against accident, sickness and unemployment. The policies are sold alongside loans and mortgages, and often include nil refund clauses which mean that if a borrower wants to end the contract after paying off their loan early or if circumstances have changed they can lose hundreds of pounds. .
State tells mortgage broker to halt
New York mortgage broker Vertical Lend Inc. forged borrowers' signatures, created false loan records, and charged fees that were never disclosed to customers, state regulators said yesterday as they ordered the company to stop selling mortgages in Massachusetts. Among the findings in a January audit of Vertical Lend by the Massachusetts Division of Banks was that one out of four borrowers sampled had paid, on average, nearly $2,000 -- and some as much as $6,445 -- in fees they were unaware of. Also yesterday, Massachusetts ordered SouthStar Funding LLC to halt operations after regulators learned the company is no longer funding some loans it had agreed to make, said David Cotney, the banking division's chief operating officer. That was the latest detail to emerge from the troubles roiling the subprime mortgage lending industry.
Sub-prime situation can be overcome in time
The current home mortgage crisis headlining the news is not the first story of its kind. It seems every five years or so the sub-prime home mortgage market experiences a correction. And it has to. Americans wanting to own their own homes need financing. One of the facts of life is many of the lenders offering home mortgages do not extend credit to borrowers with less-than-perfect credit. This creates a niche market that sub-prime lenders are all too eager to fill.These lenders know a sizable segment of the home-buying market will pay both higher interest rates and enlarged fees just so they can own their own home. Who would argue these rates and fees aren't justified? After all, they are extending large amounts of credit to a segment of the population who has found it difficult to balance their income with their outgo.In our free enterprise style of economy, increase often follows those who willingly supply the needs of a riskier segment of the population.
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