THE lending industry has tried to make it easier for borrowers to understand thetrue cost of a mortgage by disclosing both its interest rate and its annual percentage rate, or A.P.R. But consumers may often wonder which figure they should focus on when buying or refinancing a property.This is the first mistake in Browning’s report. It was not the lending industry that focused on making a loan’s true cost understandable, it was the folks in Washington, D.C. who promulgated the Truth-in-Lending Act.
The answer, many mortgage experts say, may seem counterintuitive: while the A.P.R. is popularly seen as providing a more complete picture of what you are actually paying each month, it often omits some costs.
Yes, that’s true, but what is overlooked is the underlying premise of the APR—that all lenders will have to calculate the APR the same way. There never was a promise that consumers would have to do some homework in figuring out which loan was best for them.
“When someone calls for a quote, we always give the interest rate, not the A.P.R.,” said Melissa Cohn, the president of the Manhattan Mortgage Company, a brokerage firm. “The A.P.R. is not all-inclusive.”Whoa, if they did that in print, it would be a violation of Federal law.
When you read the full report you will see that the argument is being made for the further dumbing down of the loan process by including ALL costs in the APR calculation. In reality that sounds like a plan that would work, but by lumping in costs that are fixed in the marketplace, such as, mortgage tax in NY, and those that vary by company, for example, credit checks, you create a scene that is ripe for errors.
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