A Ford Foundation supported initiative—the Fair Mortgage Collaborative—has begun certifying lenders as “fair and safe” based on audits of their mortgage products. Certified lending networks will also offer the approved products. The group’s founding members include Shorebank Corp., Prime Alliance Solutions, and 19 other organizations including secondary market intermediaries, advocacy groups, and foundations.
The audit is guided by several core principles, says FMC executive director Howard Banker: “Lenders have to work for customers. There’s no steering, no predatory loans are allowed, and nonstandard loans must have clear and compensating consumer benefits.” FMC will keep its rules and standards current for new product types. “We look under the hood,” Banker adds.
FMC looks for a “very wide range of opinions” as part of the auditing process, according to Banker, bringing together “advocates and real lenders who do real volume.”
Gerri Detweiller, a personal finance expert at Credit.com, says the certification is a “good step—it brings some sensible standards back to the housing market,” although some exotic products are “dying their own death” in the collapse of the bubble. “Some things can be a little bit tricky,” she observes. The stated-income loan, for instance, is “very valuable for self-employed borrowers.” But FMC’s seal of approval should provide some confidence for homebuyers. “Consumers are trying to figure out who they can trust right now, and this can help them decide,” says Detweiller.