President Barack Obama recently proposed that all lenders offer "plain vanilla" mortgages so consumers could understand the loan terms and the risks associated with the mortgages. The proposal includes creating a Consumer Financial Protection Agency that would be responsible for these and other laws that help consumers make better decisions. This proposal met strong opposition by the lending industry for trying to impose too many rules and limiting the flexibility of lenders.
"Under Obama's plan, a new government agency would be established to monitor the fine print on such products as mortgages and credit cards. The Consumer Financial Protection Agency would require that lenders be up front about the cost of their products and offer customers a standard low-risk alternative."
On Zillow Mortgage Marketplace we focus on consumer advocacy in a slightly different way. Instead of limiting what lenders can do, our goal is to educate borrowers on the risks and benefits of each loan program so they can make the right decision themselves. We have created a number of tools to educate consumers on how to compare mortgage types, analyze the risk associated with different loan programs, and find a trustworthy mortgage lender.
Here are some of the tools we built and why we think they are important:
• Monthly Payment Graphs – each quote has a graph showing what the monthly payments will be over the life of the loan. For adjustable rate mortgages, we always show the worst case scenario so borrowers can clearly see any risks associated with the mortgage.
• True Cost – this calculation shows the interest and fees costs of all loans over any time period. This helps borrowers compare prices for quotes across all of the different loan programs.
• Comparison Page – compare all loan details in an apples-to-apples fashion across multiple quotes in one place. Quotes are completely accurate and show all ARM details including margins, caps, and index.
• Cumulative Costs Graphs – these graphs show the total cost of the loan over time so you can see how much you will end up paying in interest, insurance, and fees.
• Lender Ratings – every lender on Zillow Mortgage Marketplace is held accountable for their actions and customer service through borrower ratings.
• Mortgage Calculators and Help Articles – we created a whole library for consumers so they can figure out how much they can afford and the best way to repair their credit.
Helping consumers make better choices is extremely important to us. If you have ideas for other tools or features that you think would help educate consumers, please let us know.