Closing Costs Gone Wild!

I don’t like to throw statistics around too often. They can be misconstrued and twisted. But some of them just shout out and leave absolutely no room for interpretation. Here’s one: According to Bankrate.com, buyers’ closing costs jumped almost 37% over last year.

Closing costs have increased because of the administrative burden placed on lenders because of these new disclosure requirements

This info is both startling and ironic. Startling because that is an insane number and ironic since HUD was bragging about all the alleged precautions they had to put into place to keep the fees paid to loan officers in check.

But actually, closing costs have increased because of the administrative burden placed on lenders because of these new disclosure requirements. Although designed to protect the consumer, they have only succeeded in unnecessarily costing them more.

Closing costs have also increased because of all the additional time that must be allocated to investigating borrowers on a molecular level. (Italics added by author to highlight the insanity in the lending universe.)

Here are the read ‘em and weep stats according to BankRate.com:

‘On average, the origination and third-party fees on a $200,000 purchase mortgage added up to $3,741 in this year’s survey. That’s a 36.6 percent increase over last year’s average of $2,739.

Fees charged directly by lenders went up 22.8 percent, while fees charged by third parties — for things such as appraisals and title insurance — rose 47.2 percent.’

At the end of the day, it’s a world gone mad.

Consumers aren’t being protected, they are being gouged. Back when Washington Mutual was manipulating their appraisal management company’s valuations, it sparked a lawsuit from New York state Attorney General Andrew Cuomo that inspired this HVCC insanity that triggered the widespread mandate of appraisal management companies that lead to the use of inexperienced appraisers whose pay was “more affordable” than those appraisers who really knew what they are doing.

The result of all this stuff rolling down hill?

  • The buyer pays more
  • The appraiser gets less
  • The buyer receives an inferior product
  • How is this serving the customer?

In my opinion, it would be hilarious if it weren’t so tragic; the answer to the original problem was to force everyone to have appraisal management companies. I understand the need for appraisers to have independence from those in loan origination roles, but there has to be a better way that benefits the consumer. Why not enforce the USPAP regulations that appraisers supposedly hold themselves to in the first place?

So with all that being said; why it is that the evil mortgage brokers are the scapegoats? And what color is the sky in their world?

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