I have been searching online for the best mortgage rate and, when I do so, many banks come up that I have never heard of. Given the recent mortgage market collapse, am I better off with a local or well-known bank than a virtual unknown?

The mortgage meltdown should give you a concern. However, the problem really was not with the lenders, it was with the borrowers who gambled that the real estate values would continue upward and that they would be able to refinance out of the adjustable rate loans for fixed-rate loans with the new equity that they got as a result of the rising market. Once the prices stopped going up and started going the other way, that is when the mortgage amount became greater than the value of the home, and the borrowers could no longer afford to pay the increased rates on the mortgage and so the whole system buckled. As a result of that however, lending standards are now far tougher and those institutions that are still around are survivors and much more heavily regulated. The important thing about the product that you are about to borrow is that it is fungible. Money from one bank spends as good as money from another bank. The only thing you really have to worry about is to be sure that the costs that you are quoted are the same when the loan closes. There have been significant changes in the Real Estate Settlement and Procedures Act which really empower borrowers by prohibiting lenders from making significant changes to the good-faith estimate that they send to you after you apply for a loan. So, the bottom line is that you should apply to an institution which is going to give you the best interest-rate and the lowest closing costs. Once they lend you the money the game shifts; now they are the ones that have to worry about you repaying the loan.

If you have questions about this or any other legal matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.

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