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SALT LAKE CITY -- It's an idea that's popular with consumer groups. Lenders need to show borrowers what all those little fees are, and prices have to be guaranteed. So, the federal government made these changes to the Real Estate Settlement Procedures Act.
Mortgage analyst Al Bingham says, "Whatever you disclose at application have to be the final fees when you go to close."
Certain things, like appraisal fees, loan origination fees and title fees cannot change once they've been guaranteed. Bingham says it does seem like a fair concept on paper, but he says mortgages are never that simple.
"[Federal officials] thought that you could determine all the fees at the very beginning of the loan application. You cannot. There are too many variables out there," he says.
Bingham says additional fees are needed all the time. Practically half of the loans he's worked with have needed additional costs.
"An appraiser says, ‘You know what? There's some wiring that needs to be fixed,' or, ‘There's a broken window,' or different things like that. So, they have to go and repair it and that calls for additional inspections," he says.
So, if lenders don't want to eat those extra costs, Bingham says they'll have to charge more up front. He's noticed this is already happening.
"Lenders are going to be charging more money just to offset that risk," he explains.
Bingham and other mortgage officials say lenders may not give good faith estimates anymore because they need to insulate themselves from losing money on loan origination fees. Bingham also believes lenders may actually charge for things the borrower may not need, like an additional inspection or title fees to remove a lien.
Not everyone thinks that's a likely scenario. Other analysts say it's more likely to see lenders bump up their loan origination fees.
E-mail: pnelson@ksl.com
