CFPB, in connection with FHFA, has found that all too many home buyers do not shop for their mortgage financing.
It seems that, although consumers will go online and shop for homes, cars, TVs and whatever, they just don’t take the time to investigate mortgage rates and/or Lenders. Most buyers depend on the guidance of their Realtor, Builder, or use a lender recommended by a friend or family member. Why? Maybe the lending process is still a little too confusing or scary, or is it that they don’t trust lenders to deliver what they advertise?
In response, the CFPB is instituting this new rate tool (New CFPB Tool Article) to provide a site for consumers to get information about the average rates offered in their area for various products at different credit score levels.
The questions are: Where do these rates come from? Are they a real representative sampling? And, oh, by the way, where does the consumer get their current score (and do they know how to get it)? What about fees and costs and the good old APR? Have they been forgotten?
The new CFPB site provides rates from “large banks, regional banks and credit unions.” What about rates from Mortgage Lenders (Brokers & Bankers)? How often is it that by dealing with other sources and market awareness, a Mortgage Broker or Banker can bring a better product, at a better rate, to the table than that offered by these institutions? Is the CFPB getting into the business of steering consumers to certain lenders? What’s next, a CFPB listing of preferred Lenders for your area?
Another challenge is the consumer’s knowledge and comfort level in using technology. Yes, the younger generation, especially the Millennials, are computer savvy and I believe we will see them much more actively use the internet to rate and product shop, once they decide to jump into the home buying arena. Lenders should be prepared for this. These Millennials will not jump at the first offer and/or recommendation. They may be a little skeptical of financing through affiliated or recommended entities. They will shop!
However, many mature (older) buyers, and those not so computer literate (like me), may shy away from online activity, not knowing how to navigate the screens and portals, nor fully understanding the feedback provided. They will look for assistance from professionals who can explain the process and guide them through the minefield. Experienced professionals, Mortgage Brokers, Mortgage Bankers or local Bankers have been providing this service for quite some time now. Let’s not let them down.
So, maybe we should leave lending to the Lenders and oversight to the Regulators. CFPB’s intentions seem honorable. They are out to help and protect the consumer. That’s good for all of us. But, as we have seen in the past, sometimes such help has unintended consequences. These consequences, like new laws that are making it more difficult for “first time” and “low to moderate income” home buyers to get homes, can harm the consumer and hurt the industry.