WaMu acts to avert disclosure problems
Washington Mutual Inc., the largest U.S. savings and loan, is requiring that mortgage brokers show they disclosed lending terms to borrowers as a record number of Americans face losing their homes to foreclosure.
Brokers who do business with Washington Mutual must provide evidence that they revealed their compensation and explained terms of the loan they recommended, including amounts, prepayment penalties and whether interest rates or payments may change, the Seattle-based lender said Monday.
Washington Mutual also said it would try to call every borrower represented by a broker to review loan terms before closing.
Mortgage brokers have been criticized in Congress and by consumer advocates who say insufficient disclosure, deceptive lending practices and lax regulation helped boost foreclosures on U.S. homes to a record high in August. Rising interest rates have squeezed home buyers with poor credit, prompting the worst housing slump in 16 years.
“This is a step in the right direction, and it’s very important this is done to avert future problems,” said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America, a Washington-based advocacy group.
About 59% of all mortgages last year were arranged through brokers, according to Columbia, Md.-based Wholesale Access Mortgage Research & Consulting Inc.