Rating the lenders

Here’s an idea whose time has come: a public rating system of mortgage lenders.

Massachusetts officials are working on such a system as part of the Act to Preserve Home Ownership, according to David Cotney, who is the chief operating officer for the state Division of Banks. The act was signed into law in November. The legislation also included a “right-to-cure” provision, which took effect May 1 and says lenders must grant delinquent homeowners a 90-day grace period before foreclosing, and prohibits them from tacking on fees to the overdue balance during that period.

The division is still working out regulations to implement some aspects of the law, including creating a system for evaluating mortgage lenders in several areas, like how they deal with loan modifications, Cotney said. Many consumer advocates and government officials have been encouraging lenders to allow struggling borrowers to modify mortgage terms that have trapped them in expensive monthly payments.

The regulations that are being developed are similar to the Community Reinvestment Act regulations, which already apply to banks and credit unions. The state is basically extending those regulations to cover mortgage lenders.

After a system for evaluating mortgage lenders is in place, the division will launch a public rating system, Cotney said.

We have rating systems -- government and non-governmental -- for many other common purchases. You can check Consumer Reports for the scoop on a new car, get restaurant ratings from Zagat, and check an airline’s on-time arrival rate with the US Department of Transportation. So seems like it’s time for consumers to be able to check mortgage lender ratings.

Enjoyed this post? Get blog updates delivered to your reader. Click here.