April 23, 2007

State Departments of Banking and Consumer Remind Homebuyers of Mortgage Company Pitfalls

This news release was issued jointly by the Department of Banking and the Department of Consumer Protection.

With the 2007 real estate season underway, the Connecticut Department of Consumer Protection (DCP) and Department of Banking (DOB) are reminding potential buyers to do their homework before choosing a mortgage company to finance their home purchase.

“When looking to buy a home, think as carefully about your financing options as you would about the square footage or number of bedrooms you’re looking for,” Consumer Protection Commissioner Jerry Farrell, Jr. said today. “One way to keep your wants in line with your means, is to seek prequalification from a bank or mortgage company, so you have an idea of how much house you can pay for.”  A consumer can make an appointment with any licensed mortgage company or bank for a no-cost mortgage prequalification.

“It is important for the consumer to ensure that the terms and conditions of their loan match their plans and available resources,” stated Banking Commissioner Howard F. Pitkin.  “People have over-extended themselves in past and have run into all sorts of financing problems.”

It is also essential for home buyers to learn about the many financing options that are available.  For example, first-time buyers with low or moderate incomes may qualify for a mortgage from the Connecticut Housing Finance Authority (CHFA).  CHFA also offers down payment assistance to qualified first-time home buyers.  More information on CHFA and its lending programs is available on its website, www.chfa.org

As DCP Commissioner, Mr. Farrell heads the state agency responsible for regulating real estate sellers and appraisers in Connecticut.  Commissioner Farrell explained that consumers who are working with a real estate sales agent need to be clear on their rights and the rules governing the fiduciary responsibility of that agent.

Commissioners Pitkin and Farrell both recommend that consumers research the various types of financing available and comparison shop to find the best financing terms for their needs.

“If your real estate agent does make suggestions, you should ask for more than one name and check into each,” Farrell said. “In the final analysis, the mortgage terms that you choose should be based on what’s best for your particular buying situation.” 

Recently, Governor M. Jodi Rell convened a Sub-Prime Mortgage Task Force.  “Under a recommendation from the Governor, The Banking Department, along with the CHFA, has recently formed a task force to examine the problems of the sub-prime industry.  Many lenders wrote mortgages requiring no down payment, using less stringent underwriting criteria than traditional mortgages,” added Commissioner Pitkin. We are charged with identifying the scope of the problem and figuring out how to help these families.”

For more information on the Task Force or other real estate and lending issues, please visit the Department of Banking and Department of Consumer Protection Web sites.