Mortgage-financing violations of the federal truth-in-lending act are widespread, enormously costly to home buyers, difficult to police and are likely to get worse in 1983.
That's the view of consumer lawyers familiar with the problem around the country. And it's not disputed by credit-market experts at the Federal Trade Commission (FTC), the agency empowered to enforce the truth-in-lending law.
What it means to you could boil down to this:
* The below-market, attractive-rate loan you signed for earlier this year may carry an understated price. Its true annual percentage rate may be several points higher than the going market rate. Go back and check the computations on the truth-in-lending form; you may have cause for legal action.
* Some of the real estate ads you see this weekend, such as the ones with the eye-catching "8 percent mortage money" in big letters, may violate federal law. FTC officials say that a significant number of the real estate advertisements they monitor contain statutory violations. The most serious, repeated infractions can expose the advertisers to penalties of up to $10,000 a day.
* The creative loan you've just been offered by a home seller could be more dangerous than you think. One Arizona woman buying a condominium this year, for example, thought she was getting a deed of trust and trading in her mobile home as part of the financing package. Actually, she ended up with nothing more than a leasehold interest in the condo, no legal title to real estate, no equity and no mobile home.
Annual percentage-rate problems are among the most common truth-in-lending violations, according to an FTC attorney. As high as 50 percent of the real-estate ads he sees in some newspapers "contain substantive or technical violations" of statutory rules, he says.
For example, ads that state discount rates without including conspicuously the true, annual percentage with all fees, points and other charges figured in are not only misleading, according to the attorney, but breaking federal law.
Ads offering subsidized "buy-down" rates in the first year or two of the loan, but not providing other crucial details, such as how high the rate or monthly payments may go in later years, are also illegal.
How can consumers equip themselves to handle the complexities of new loan types and determine whether they're getting a fair credit deal? Two new resources are available, one of which has never before been publicized:
If neither you nor your lawyer is able to make an independent assessment of the "annual-percentage rate" being asked, you can get quick help inexpensively from a new project just begun by the National Consumer Law Center.
Send a copy of your financing documents--ideally before you close the loan and buy the house -- to NCLC, Attention: Amortization Check, 11 Beacon St., Suite 121, Boston, Mass. 02108. Send a check for $20 made out to the center, and you'll get back an annual percentage-rate computation on whatever type of "creative" terms may be attached to the mortgage.
A second new resource -- this one free -- is "The Mortgage Money Guide" by Justin Dingfelder and Carole Reynolds of the FTC. It clearly and concisely explains the mortgage-market maze.