FHA Mortgages Versus Credit Cards

by Peter G. Miller
May 29th, 2007

Sam Thompson, a blogger and North Carolina mortgage loan officer, makes the point that

“Congress is jumping on mortgage lenders for charging 12% interest rates while credit card companies are getting away with charging 28% with no signs of intervention!”

Let me say that, halfway, I agree.

Mortgages and credit cards are different. Mortgages are secured financing while credit cards are not. Mortgage debt also tends to be vastly larger than credit card balances. That said, the rates and terms associated with many if not most credit cards are outrageous. If organized crime knew how much could be made with credit cards they would give up dope and stick to plastic.

But credit card rip-offs do not excuse or justify mortgage abuses. As Sam says, ”many in the mortgage and real estate industry have taken advantage of people with programs that were doomed to fail that need to be put out of business but as I read about the many initiatives that congress and others are making to stop this, I have to ask, what about the credit card industry and medical insurance industry? These two segments are hitting borrowers much harder than the mortgage and real estate industry that has to take the wrap for the country when the homes go into foreclosure. But, think about this, even the worse rates in the mortgage industry that the worse lenders charged are still less than half than what the credit card industry charges. And medical collections due to problems resulting from poor medical insurance programs that cost too much and don’t pay out enough that end up in collections are killing people’s FICO score causing them to only qualify for the worse programs at best. These are huge problems that need to be fixed too!”

One thing we know for sure is that with an FHA loan borrowers won’t get screwed with changing loan terms, phantom loan applications or credit score abuses.

FHA loans from every lender have the same terms and conditions – but you have to shop for the best rates. Under the FHA program “stated income” loan applications are not accepted. Income has to be documented so borrowers can’t take on more than they can handle.

Like Sam, I hope Congress holds hearings on credit card abuses. That would be front-page news for millions of borrowers — and millions of voters.

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This entry was posted on Tuesday, May 29th, 2007 at 3:05 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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