Taming the Predators

· The company cannot provide incentives that encourage its employees to include prepayment penalties in mortgages, or any other fees or closing costs.

· Ameriquest must take steps to ensure that all appraisals are accurate, that appraisers do not inflate property values, and that no employees influence the appraisal process. The company must now use an automated system to select appraisers from panels created by each state.

· Personnel are not to encourage potential borrowers to falsify their income sources or assets.

I want to go back to the first item on the list -- a promise by Ameriquest to clarify loan terms. There are short "scripts" in the agreement that every homeowner or potential borrower should take with them to their closing.

Even though every borrower is supposed to get paperwork clearly stating what the terms of their home loans are, they often don't read the terms or understand them.

So with the Ameriquest agreement, you now have in plain English what you should be told verbally.

In the Ameriquest agreement, its sales staff has to say the following if a borrower is getting a nonprime fixed-rate loan:

"The loan we have been discussing is a [insert the term of the loan]-year fixed-rate loan for [insert loan amount]. The interest rate is [insert interest rate]. The monthly payment is [insert monthly payment], which does [or does not] include escrows for property taxes or insurance. Your loan does [or does not] include a prepayment penalty."

If you're getting a loan that has an adjustable rate, this is what you should be told:

"The loan we have been discussing is an adjustable-rate loan for [insert loan amount], with an initial interest rate of [insert initial interest rate]. Your initial monthly payment would be [insert initial monthly payment], which does [or does not] include escrows for property taxes or insurance. Your loan does [or does not] include a prepayment penalty."

You should also be told (as laid out in the Ameriquest agreement):

"Because this is an adjustable rate loan, the initial interest rate and monthly payment I quoted you are only guaranteed for the first [insert length of initial fixed-rate period] of the loan. After that, your interest rate can increase by up to [insert rate adjustment cap] percent each year. But, your interest rate can never be higher than [insert lifetime cap] percentage points over your initial interest rate."