I’m watching CNN this morning while I’m getting ready to head into the office (it snowed a few flakes this morning, so being the chicken I am, I’m taking my time before I venture onto the roads)…when I see three commercials within 10 minutes that I found somewhat disturbing.
First commercial: Ditech…cash out refinance your home with a fixed rate up to 125% of the value! Well, thank God it’s not an interest only negative amortized ARM! In light of the increased foreclosures and troubles with subprime lending, I cannot believe I just saw this commercial. What happens to the borrower who has overextended their home equity and then they lose their job or they need to sale? Guess what, they can’t. There’s not ANY equity to pay for closing costs. Welcome to Foreclosure City.
Next: Countrywide…offering a no cost loan. No origination fee, no credit or appraisal fee and no third party (title, escrow, etc.) fees. This isn’t so upsetting to me (especially after following the Ditech ad). Anyone can provide a no-cost mortgage. What the commercial does not tell you is that no cost mortgages do cost a borrower in the monthly mortgage payment by a higher interest rate. Nothing is free. Typically, 1% of your loan amount equals 0.25% to interest rate. If your closing costs amount to $2000 and your loan amount is $200,000, you can increase your rate by 0.25% and have "no closing costs" from any loan originator. Please always compare good faith estimates by different lenders. Their commercial was the least offensive–they just happened to be sandwiched between two commercials that got my goat!
Last: Freecreditreport.com. You know the commercial…the friendly redhead young man challenges you to guess his credit score and encourages you to find yours. This is great advice. Where this one slips up for me is that it’s URL sounds just like www.annualcreditreport.com in fact, I think freecreditreport.com is a better marketing name than the one created by the big three credit bureaus by order of our government. Should you not read the disclaimer on freecreditreport.com’s site, you might believe this is the web site the Fed had created for consumers. However, this is Experian’s site and should you obtain your "free" report, you’ll be signing up for a credit watch service at $12.95 per month. Not so free after all, is it?
I just had to vent a bit. It’s no wonder people get confused about their mortgages and finances with all of the misleading and deceptive advertisements on television, the internet, and coming to our mail boxes at home.
Bottom line: Do your research. Ask questions. Be responsible.