Are You Educating Your Borrowers?

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You would think that after all the hard work put in by CFPB and others to educate consumers on the mortgage process and associated costs we would now be seeing better results.

According to a Wilson Perkins Allen Opinion Research survey, for ClosingCorp, in January 2017 more than 50% of homebuyers are still surprised by the costs at closing.

Homebuyers were most surprised by mortgage insurance, bank fees, points, taxes and title insurance.Other findings reported were:

• 58% said the initial loan estimates were changed before closing
• 31% said their Loan Estimate and Closing Disclosure fees matched (yeah)
• 17% were surprised to find there were any charges at the closing (duh)
• 35% were surprised by higher than expected closing costs.

So, it seems we still have quite a way to go before we can get comfortable with the consumers’ understanding of the fees and costs associated with buying a home.

Is it that lenders aren’t taking the time to carefully explain what a consumer should expect to pay at the closing?

Could it be that the new disclosure forms are too complicated? Maybe it’s that the consumer either isn’t listening or doesn’t understand what is being provided at application? Probably, it is a combination of all three.

As usual, it’s left at the doorstep of the lenders to figure out the problem and get it corrected. Closing agents and Realtors believe lenders need to do more to educate the consumer.  Even though some of the fees, that surprised consumers, are fees charged by these other entities, they are often charged without the lender’s knowledge.

Regardless, the TRID rules make the lender responsible for disclosure and accountable for any errors. It is important that lenders take these responsibilities very seriously.

Originators and support staff must be trained to educate and explain the entire loan process to including the fees and costs the consumer should expect to pay at closing and why they are paying them.

Otherwise, I’m afraid we’ll see more well-intentioned disclosure regulations. You know what they say about good intentions. Let’s not go there.

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.