The Fair Mortgage Collaborative is a consortium of lenders, brokers and mortgage technology providers. It has received money from the Ford Foundation.
The group wants to only extend loans that are in the borrower’s best interest. How will they know?
The group plans to identify lenders who meet its strict standards.
So far, none of the big lenders have signed up.
He says members must submit to audits and ongoing monitoring by his staff to ensure they abide by the organization’s rules. Among the rules is one requiring that borrowers first be considered for 30-year fixed-rate mortgages. If they don’t qualify for those loans, others could be offered, but there must be “clear, verifiable benefits for the applicants,” Mr. Banker said.
Offering adjustable-rate mortgages — which could, for instance, raise monthly payments to more than 45 percent of a borrower’s monthly income — would raise a flag.
If after an audit the collaborative found that a lender had shown a pattern of offering those riskier loans to borrowers who could qualify for less expensive products, Mr. Banker said the lender would most likely be ousted from the organization.