According to the 2007 interagency statement on subprime mortgage lending, what should an institution offering mortgage loans to subprime borrowers provide before submission of an application?
According to the 2007 interagency statement on subprime mortgage lending, what should an institution offering mortgage loans to subprime borrowers provide before submission of an application?
According to the 2007 interagency statement on subprime mortgage lending, institutions offering mortgage loans to subprime borrowers should provide payment shock information before submission of an application. This is crucial to ensure that borrowers are fully aware of the potential increases in their monthly mortgage payments due to adjustable-rate mortgages resetting to higher interest rates.
Payment shock information. According to the 2007 interagency statement on subprime mortgage lending, institutions offering mortgage loans to subprime borrowers are specifically advised to provide information on potential payment shock. Payment shock is a term used to describe the risk that borrowers face when adjustable-rate mortgages reset to higher interest rates, significantly increasing their monthly mortgage payments. The statement emphasizes the importance of ensuring that borrowers are fully informed about the risks and consequences of their loan options, including the possibility of substantial increases in their future mortgage payments.