Home Financing Changed Yesterday

   Late yesterday the Federal Court of Appeals lifted the stay on the way a borrower is charged fees.  So is this a good thing for the average consumer?  You all remember HVCC the appraisal change that was implemented and how it was to protect the consumer and home values.  Never mind about the 100% increase in cost.  The additional cost was necessary to protect the consumer.  Now no one can even speak to an appraiser to show additional items that might set your home apart.  So let’s break this new Fed action down. 

Pros

  •  As of the new Fed action a Lender is supposed to send you information on all of their loan placement options and show the actual fees associated with a particular loan placement option. 
    • Brokers have loan placement options as they work with multiple banks on many levels.  Banks only offer their program so they only have a single product to some degree. 

 

Cons  

  • As of the new Fed action it is no longer possible for a Loan Officer to cover any last minute miscellaneous fees at time of closing. 
    • Real Estate transactions are fluid in nature and therefore impossible to calculate the exact total fees.  Anyone that has every purchased a home has been what is called an “Escrow Pad.”  These funds are used to cover additional last minute fees or cost and the balance left is refunded back to the consumer at closing.  

 

  • If you any reason your loan does not close on time a Loan Officer in the past has been able to pay for what is called a rate lock extension. 
    • Well now that option is now gone.  The new Fed action does not allow for this cost to be paid for by the Loan Officer so that means the consumer will get this cost added to their closing cost.

 

  • The new Fed action no longer makes it possible for the Lender to pay some of the consumer’s fees.  The Fed action requires the loan Officer to structure the loan so all fees are covered or no fees are covered. 
    • So what this means is you will get two rate options which will break down something like this;
    • A fair rate with the consumer paying all of the loan fees or a no fee loan with a much higher rate.  The higher rate will allow the Lender to sell the loan on the secondary market which will allow them to recover their cost of paying the consumers fees.    

 

  • The new Fed action will push out many low level Mortgage Brokers and lead to high loan cost over all due to lack of competition. 
    • We are a fee market society and the cost of a loan is dictated by the market.  The new Fed action says that the average person does not understand the loan process and with that I have to agree.  But the bottom line is what the consumer is paying and they understand that.  Would you go to AMPM and buy a 32 ounce drink for $2.50 when you can go to 7/11 and get a big gulp for $1.50?  The point here is you should have the choice. 

 

  So I am sure my reader Vic should even get this but if not then a Vic type consumer will never get it.  Mortgage Brokers keep the loan cost down much as Costco keeps grocery store prices down and so on.  It is our system and for the most part is work pretty good.  If you disagree then maybe you should look at it this way.  There are those of us that we work harder than the next person to obtain more stuff whatever that stuff is.  There are also people that say they are not married to their work and refuse to work as hard as others.  So shouldn’t the person that works harder and longer be rewarded? 

   Let’s look at this another way in the beginning of the meltdown the Media had multiple stories stating that Brokers are bad.  As people looked into this that proofed to be untrue and the focus was shifted to the “Wall Street Fat Cats.”  Well yes they play a role just as the Fed Commission that was asleep at the wheel.  So bring thing current to today and who is the biggest problem now.  Many people are making business decision short sales or just letting their homes go because they do not want the home today because of its value.  Isn’t this the same greed?  It is money and not wanting to pay for an investment that went bad of an individual with complete disregard for how it impacts anyone else.  Please Vic or anyone else explain how this type of greed is any different than the Fat Cats. 

   Putting the Fed in control of mortgage fees is a huge mistake as clearly the law makes do not understand how a Loan Officer gets pad either.  Look if gas is $3.00 and one station and $4.00 at another which station are you going to go to?

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