MReport April 2022

TheMReport — News and strategies for the evolving mortgage marketplace.

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30 | M R EP O RT FEATURE Lender A doesn't charge the bor- rower Origination Fees, a MERS Registration fee, or a Tax Service fee. In this example, it's possible that Lender A could have covered these fees. The side-by-side com- parison shows that Lender A is better than Lender B by, at least, a difference of $1,688. Nevertheless, something as seemingly simple as comparing these totals can be far more difficult than just choosing the Lender that is less costly. Guidance from Regulation Z; Comment 19(a)(1)(i)-2 tells us that the itemization of the amount financed—as required by § 1026.18(c)—will contain items (i.e., origination fees or points) that must also be disclosed as part of the good faith estimates of settlement costs required under RESPA. The caveat is that credi- tors who furnish these good faith estimates under RESPA aren't required to give borrowers an itemization of the total amount loaned to them. If creditors furnishing LEs aren't required to itemize costs to borrowers, it becomes nearly im- possible for borrowers to compare total charges between lenders. Even in the event that all these fees are itemized, fees may not be consistent between lenders, which hinders borrowers from compar- ing total charges and finding the best offer for them. Despite the countless mentions of origination fees being labeled as reason- able and bona fide throughout Regulation Z, TILA, RESPA, and CFPB guidance, we still see the total amounts charged for these fees haphazardly appearing all over the board. For instance, a lender might charge a fee between $10-100 per person on a credit report, yet many borrowers aren't aware that this fee is covered by some lenders. In return, creditors might choose to collect a fee for obtain- ing a credit report, deeming it an ordinary course of their business. Should the criteria in § 1026.19(a) (1)(iii) be met, the creditor might then describe this fee as an "ap- plication fee" instead. However, the CFPB still states that, by law, "… a credit reporting company can charge no more than $13.50 for a credit report." This means that for a typical household, where both spouses are on the same mortgage loan, lenders may expect borrowers to pay up to $400, even though the law re- stricts this total charge to be bona fide, fair, and reasonable. The Letter of the Law and the Intent T itle X of the Dodd-Frank Wall Street Reform Bill was brought about with twofold intent; to provide greater clarity to borrowers regarding the mort- gage loan terms they are agreeing to, and to grant borrowers the ability to compare different mort- gage loan offers. Furthermore, Title X also created a new Bureau of Consumer Financial Protection within the Federal Reserve Board, meant to serve as a new supervisor for certain financial firms, as well as a maker and enforcer of rules against abusive, deceptive, unfair, and outright prohibited practices re- garding the financial products or services offered to consumers. The time to democratize home lending is now, and this process can be started by providing bor- rowers with clarity on charges from lenders. This will ensure consistency across origination fees, enabling borrowers to more easily compare costs between different lenders. Currently, this is not the case; no tools, services, or platforms exist to make these comparisons between lenders ac- cessible or easy—if even possible. To help borrowers in this regard, we must implement methods to make comparing LEs (along with available information about which lenders charge for specific services) from multiple lenders side-by-side as seamless as pos- sible. This way, borrowers can more easily find the best lending offer based on their needs. After 18 years in the home lending industry with Wells Fargo Home Mortgage as an SVP, Yatin Karnik realized that homebuyers and those looking to refinance existing mortgages needed a solution to democratize mortgages and simply get a better deal. As a staunch advocate for residential home borrowers, Karnik is on a mission to educate borrowers about the lending process. In furtherance of this aim, Karnik founded Confer, Inc. and developed a revolutionary and disruptive application that will allow consumers to compare loan estimates and negotiate. Fig 1: Section A of Loan Estimate showing Origination Charges Fig 2: Section A of Loan Estimate showing, Origination Charges sections contains Origination Fee The time to democratize home lending is now, and this process can be started by providing borrowers with clarity on charges from lenders.

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