June 12, 2009
Mortgage Borrowers Gain Tool to Access Fair and Safe Loans
by Robert Kropp
The Fair Mortgage Collaborative provides consumers with access to mortgage lenders who have been
certified for their fair lending practices.
Predatory mortgage lending may not have single-handedly brought down the global economy, but it
certainly played a major role. Mortgage lenders who took advantage of the complexity of their
financial products steered unwary consumers towards products which increased the revenue streams
for the lenders, but were inappropriate for the consumers' needs. The consequences of the
widespread loan defaults and foreclosures that resulted are evident throughout the economy, from
decaying neighborhoods to failing banks.
Recognizing that consumers need a source
to which they can turn for verifiable information about safe lending practices, a nonprofit
membership organization called the Fair
Mortgage Collaborative (FMC) was officially launched on June 9. The mission of FMC is to
provide "low and moderate income and minority homeowners and homebuyers access to mortgages with
the consumers' best interests at its core, at a fair rate of compensation."
In a press
conference announcing FMC's launch, Janis Bowdler, Associate Director of the National Council of La Raza (NCLR) and Chair of the Board of FMC,
said, "FMC exists to put an end to unfair predatory lending, by helping to connect consumers to
fair, safe, and trustworthy mortgages."
George McCarthy, US director of development of
finance and economic security at the Ford
Foundation, the major supporter of FMC, said of the decision to help form the organization,
"How do we stop mortgage lenders from downstreaming people into products that are not advantageous
McCarthy continued, "Establish standards and enforce them. Certify lenders and
monitor them. Set up a framework to do this. FMC stands as a solution to the moral hazard problem
that happened at the retail lending level."
To accomplish its mission, FMC identifies and
certifies both for-profit and non-profit mortgage lenders that practice fair and safe lending
practices. Member organizations are certified through a rigorous process that includes annual
self-certification, monitoring site visits, prominent posting of FMC’s web address and telephone
number for consumer complaints, and annual loan data reporting.
Howard Banker, Executive
Director of FMC, described the rigorous auditing standards that membership organizations must
"The protocol for certifying lenders runs to some 75 pages," Banker said. "The
first step is simple: the consumer, and not the lender, must be in charge. The lender must provide
the consumer with the best possible mortgage product for which he is eligible. If the consumer does
not qualify for a traditional loan, then he must be provided access to loan counseling services.
And lenders must not offer prohibited products such as stated income products," in which a
consumer's stated income is not verified.
FMC plans to add a system to its website which
will allow consumers to type in a zip code to learn the certified lending organizations that serve
it. At present, a list of
certified lenders is available.
The lending organizations already certified by FMC provide
mortgages currently totaling $520 million per year. Among the first group of FMC's certified
organizations are Boeing Employees Credit Union
(BECU), Clearinghouse Community
Development Financial Institution, National Council of La Raza (NCLR), and the National Federation of
Community Development Credit Unions.
The inclusion of community development financial
institutions (CDFIs) in FMC's first group of member organizations stands as a testament to the
practice of fair mortgage lending that CDFIs have done for many years. CDFIs have long developed
knowledge of the communities in which they do business, as well as relationships with customers who
are often first-time homebuyers who need help with the process of buying a home. CDFIs also offer
nonfinancial services such as homebuyer education courses and counseling on how to avoid predatory
SocialFunds.com spoke with Mark Pinsky, CEO of Opportunity Finance Network, a network of more than
170 private financial intermediaries that through 2007 originated $20 billion in financing in
non-conforming urban, rural, and Native communities, about the formation of FMC. Opportunity
Finance Network is an FMC partner.
"As far back as 2003, we identified a need to provide
market-based alternatives to predatory lenders, and to create a mechanism for rebuilding confidence
in mortgage lending," Pinsky said. "FMC provides a very rigorous certification process that looks
at fiduciary matters as well as responsible lending practices."
As for Opportunity Finance
Network's involvement with FMC, Pinsky said, "Our role is active, but we do not have a business
interest. We want to be a conduit between the FMC and our members. We can point our members to FMC
as a third-party certification process."
"Our members gain access to borrowers and
investors," Pinsky said. "For investors who want their money to go to responsible lending, FMC
certification is a seal of approval."
Referring to current efforts in Congress to pass
legislation that aims to put an end to predatory lending, Banker of FMC said, "We are excited at
the prospect of being put out of business. But until that day, consumers need access to know who
the good lenders are."
"Furthermore, regulations are often static," Banker continued. "The
mortgage industry is very volatile. Our standards are constantly upgraded and monitored. We
maintain standards for the current mortgage industry."
"The launch of FMC a watershed
event," said Pinsky. "It's absolutely critical."
Pinsky added, "Social investors now have
a place to go to ensure that their money is going where they want it to."