Coalition to Back Those Refusing to Offer 'Inferior' Loans

A group of nonprofits isn't waiting for Congress to repair the mortgage delivery system to make it more consumer-friendly, but instead aims to do so by promoting market participants that, among other things, refrain from offering what it considers to be "inferior" loan products. With backing from the Ford Foundation, the Fair Mortgage Collaborative has launched an effort to put would-be borrowers in front of lenders and brokers who promise to put them into safe mortgages at a fair return. FMC Chair Janis Bowdler described the effort as "a delivery system" in which consumers will be able to separate the good guys from the bad. Honest lenders who didn't push borrowers into loans they couldn't afford or for which they weren't otherwise qualified have always been out there, said Ms. Bowdler, who works for the National Council of La Raza, a major player in FMC. But they were pushed aside by big budget lenders who didn't always have consumers' best interests at heart, she said. Not only are FMC's five core standards backed by a 75-page certification process, the group will use an unidentified third-party to perform "rigorous reviews" to make sure participants do not waiver from FMC's goal of helping consumers find good lenders offering good products, said executive director Howard Banker. Lenders who offer any loans on FMC's list of banned products cannot participate in the program, even if they also offer mortgages that pass the group's muster. But consumers can still access the good loans through FMC-approved brokers. "It's the loans, not the borrowers," the Ford Foundation's George McCarthy said of the foreclosure debacle that has brought the housing and mortgage markets to their knees. "A lot of people were driven into inferior products, even when they qualified for prime loans." FMC is starting with a long list of certified lending organizations that originated $520 million in mortgages over the last 12 months.