Question:

Is negative amortization disclosure required from the lender?

Answer:

Lenders are expected to provide negative amortization disclosure on mortgage loans like Option ARMs, but they either refrain from full disclosure details, or put the important numbers and facts somewhere in fine print on page X of the loan agreement. There is no law yet that requires lenders to provide comprehensive negative amortization disclosure details on home loans.

However, sometimes even when negative amortization mortgage loan disclosure is provided accurately and in good faith, it is consumers' fault not to read it, or not to make efforts to understand what it says.

Provide full negative amortization mortgage disclosure or ban those loans?

There has been a riot against negative amortization loans for quite some time now. However, banning those is not the correct and democratic option that will work for everybody. There is a niche of consumers that benefit greatly of those loans, and it's not only the lender's interest that is served with negatively amortizing loans.

Effective debt consolidation, investors and high-cost area residents are some of those who can benefit from deferred interest loans. Perhaps, all that should be done in respect to smoothing out the effect of neg am loans on borrowers is a bill to require exhaustive negative amortization disclosure and obligatory mortgage loan counseling to first-time homeowners taking out such a loan.

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