GMAC-RFC calls for ‘binding DIP’ ban

Ramesh Sharma

February 25, 2006

GMAC-RFC is concerned that many brokers and customers are being duped by ‘irresponsible’ lenders using the phrase. As a result there is a worry that a significant number of borrowers may not realise their point-of-sale offer could be overturned at any stage based solely on a human interpretation of the status.

It calls ‘binding decisions-in-principle’ an oxymoron and terminology that deceives customers, tortures the English language and issued a call to action from other leading industry figures.

Jeff Knight, director of marketing at GMAC-RFC, explained that a binding decision is one whereby lenders stand by the initial decision and means it can only be overturned in the event of fraud. If a decision is ‘binding’ it cannot be ‘in-principle’ which he says is a decision riddled with uncertainty, as there is always a risk the decision can be overturned by an underwriter.

He said: “This is an oxymoron that simply tortures the English language and confuses people. Some lenders have got themselves into a fine mess and invented their own meaningless terminology for their own benefit. We believe this has gone unnoticed for far too long. We ask everyone to ensure there is ban on the use of the phrase and others like it. There is a fundamental difference between a decision-in-principle and a binding decision. Mixing the terms together helps no-one.”

Andy Frankish, managing director of brokerage Mortgage Talk, agreed. He said: “What we are talking about here is a mortgage offer and to use the word binding in this scenario is misleading as there are many variables and factors involved at this stage. People are being naïve if they perceive this term as actually being binding.”

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