HOME SALE/MORTGAGE CLOSING COSTS SCRUTINIZED
November, 2001 By Jim Woodard Purchasing a home can be an exciting experience. But when all the haggling over price, terms and the basic mortgage financing plan is finalized, and the buyer and seller are signing papers at the closing desk, those closing costs and special fees they’re seeing for the first time can be quite traumatic.
In most cases, those buyers and sellers are in no mood at this point to try negotiating lower fees, so they just sign the papers and pay the sales/financing fees. They often don’t even understand what they’re paying for.
This practice should be stopped, according to Housing Secretary Mel Martinez. He has called for a full upfront disclosure and explanation of all fees that buyers pay at settlement.
As a first step, he recently issued a letter to all FHA mortgage lenders encouraging full disclosure at the beginning of the process. And he’s issued a policy statement for clarification and guidance on home buying fees.
“Too many families discover unexpected fees at settlement that can add thousands of dollars to the cost of their loan,” Martinez said. “Because this is thrust on the buyers at the last moment, they have no opportunity to determine whether these extra costs are at all reasonable.”
His newly proposed program will include full, upfront disclosure of all costs associated with obtaining a home loan. And this must be in clear, understandable terms prior to the payment of non-refundable fees.
It will also require clarification of yield spread premiums – extra payments made by lenders for loans with interest rates higher than currently prevailing rates. It will also mandate clarification of current HUD policy that states consumer payments are not legal if there are overcharges or if no service is provided for fees charged.
Preliminary contacts with mortgage brokers and lenders are encouraging. Many have offered to provide new borrowers with a uniform disclosure form on brokers’ and lenders’ duties and services to be given to individuals at the time they apply for a loan. There are now about 80,000 mortgage brokers nationwide who originate about 65 percent of all home mortgages. * * * This newsletter previously reported on the current effort by banks to be allowed to become actively involved in the real estate brokerage and management fields. This, of course, is opposed by the National Association of Realtors and other real estate brokerage groups.
Now, NAR has a new reason for opposing such a move, as expressed by the NAR president-elect at a recent news briefing:
“For the sake of the national economy and real estate markets, the large banking conglomerates should withdraw their petition for a regulation under consideration by the Federal Reserve Board and Treasury Department to allow banks to enter real estate brokerage and management activities,” said Martin Edwards, the NAR president-elect.
“Now is not the time to disrupt or destabilize real estate. The proposal now before the Fed and Treasury to allow the nation’s big banks to enter these real estate fields could do just that. The proposal will cause consolidation, conflicts of interest between brokerages and lenders, and will lead to unfair competition, less consumer choice and a decline in the quality of real estate services.”
NAR is working hard on many fronts to restore health to real estate markets, according to Edwards. It supports the Administration’s efforts to bolster the economy. * * * A somewhat optimistic perspective on the real estate and mortgage lending market was recently expressed by analysts at the Mortgage Bankers Association of America.
“There’s no question that the economy took a serious downturn following the tragic events of September 11 and we expect overall fourth quarter results to be rather dismal,” an MBA report stated. “The economy is clearly in a recession. But we are very encouraged by fiscal and monetary policy initiatives recently implemented by the Administration.”
The report pointed to low mortgage interest rates as a key factor in keeping the U.S. economy afloat. The housing and real estate finance industry is expected to experience a record year with more than $960 billion in consumer mortgage refinancing this year.
“We expect rates to remain at current low levels until economic activity starts to pick up next spring. Rates may rise moderately in the second half of next year, to the 7.2 percent range for a 30 year fixed rate mortgage, but that too is near the bottom of the mortgage rate cycle for the last 30 years,” the MBA report noted. * * * The relocation industry, like many others in today’s marketplace, is undergoing a major transition. Experts in the industry offer varying views on just where it is going in the near future, but changes are inevitable. And that will affect thousands of families who are selling their homes with plans to relocate in a new community. And that, in turn, will impact the mortgage industry.
“We believe year 2002 will be a defining year for the relocation industry, as many companies reduce their staffs and service providers and seek other ways to providing assistance to keep our nation’s workforce agile,” said May Caffi, president-elect of the Employee Relocation Council (ERC). “We also must take care, even as we address these immediate challenges, that we position ourselves for certain growth and corporate expansion that will occur when the economy rebounds. We have a dual focus before us.”
Other industry leaders are not so pessimistic about short-term changes in the relocation industry. Here’s the view of Kevin Rich, current ERC president and executive vice-president of Clark & Reid Companies:
“Like all businesses today, the relocation business is very uncertain at this point. Consumer confidence has been shaken and the resulting declines in new home construction and home sales generally auger a similar decline in relocation activity,’’ Rich said during an interview for this newsletter.
“The prevailing cost-cutting mentality of many corporations has also curtailed a number of relocations. However, there are also signs that companies are re-thinking both their urban operations and the central location of large numbers of employees that could spawn some increased relocation activity.
“We remain optimistic and are actually in a hiring mode. Often, those companies that take the counter-intuitive approach, particularly during economic downturns, win out in the long run.”
One relocation specialist looks at the downsizing of many corporations and its negative impact on relocation activity. Another foresees a scenario where there will soon be an increase in relocations. It’s a matter of personal perspective at this point. But any way you cut it, there are serious challenges ahead for the industry.
In one respect, the current situation is producing more relocation activity. Here’s a perceptive thought expressed by Scott Craighead with www.Monstermoving.com :
“People are now much more willing to relocate for a job than they ever have been before. In fact, according to a recent Monstermoving poll, 83 percent of respondents indicated they are willing to relocate for a job. That’s a record proportion.” |
