Loan rates down, but proceed with caution

loan rates down, but proceed with cautionWith mortgage rates down for the third week running, the temptation to jump back into the market is undeniable -- and perhaps advisable.

But industry observers warn to proceed with caution, watching for scams and sham operations and bracing for tougher requirements.

The new Good Faith Estimate form offers borrowers some protection but also opens the door to confusion, according to the experts at New York-based direct lender Equity Now.

Though HUD is supposed to enforce the GFE, Equity Now President Michael Moskowitz said not to count on that protecting you: "They never move fast," he said. "It's always the horse is out of the barn, now let's close the door."

The point of the form is to give consumers information up front about their costs, with a penalty for brokers who fail to live up to their estimates. A video tutorial from the National Board of Realtors helps shed some light.

But to keep it simple, formerly itemized line items now are grouped together.

"The bait and switch needed to be stopped but I for one preferred the itemization," Moskowitz said. "I come from the school that information is great. I'd rather see that there's an inspection fee – maybe it's a junk fee that can be avoided -- I think the more you drill to details, the better off you are as a consumer."

Furthermore, warns Underwriting Manager Matt Hackett, scrutinize the first page of any estimate to see whether the box related to a locking date is filled in. If there's no date, then the estimate may not last long enough for you to take advantage of it.

"People are hearing things can't change once you get your GFE," Hackett said. "If your rate is not locked, there are certain things that can still change ... It is a bait and switch, just somewhat hidden."

Another way to check up on your prospective loan officers is to ask for their license number. Mortgage loan originators working for loan brokers need to be licensed, while licensing -- which includes courses and an exam -- is not required for bank loan officers.

The loan rate dip was somewhat of a surprise to many, since economists had predicted rates would raise once the homebuyer tax credit expired at the end of April. Instead the 30-year rate -- which had climbed to 5.21% and was expected to continue its rise -- dropped back to just above 5% last week. Adjustable loans fell to 4.27% ( provides rates in your area, searchable by zip code.)

The largest increase was in purchase activity, according to the Mortgage Bankers Association, rather than refinancing.

"I think that the world financial problems are going to combine to keep our rates low for a very long time, Moskowitz said. "The world is over-leveraged."
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