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With the TRID changes looming large, Brokers are taking their concerns about fee disclosures to Congress. It seems Brokers have realized that, the fees they disclose at application must be accepted by any Lender with which they decide to subsequently register a loan.
The Brokers believe the new rules governing the Loan Estimate will make it more difficult for them to properly service their applicants in shopping for the best deals (Broker Challenges). What took so long?
When a Broker issues a Loan Estimate, the Broker must provide the consumer with a good faith estimate of all fees and charges associated with the loan. This may prove difficult since most Brokers do business with multiple Lenders.
In some cases, the Broker may not be aware of which lender may provide the best deal for the particular circumstances of an applicant. In such cases, the Broker cannot disclosure the name of the Lender (Creditor) or provide the Loan ID# of that Lender. This loan ID# must be consistent throughout the life of the loan. Is having a consistent Loan ID# as important as the consumer getting the best deal?
The CFPB holds the Lender totally responsible for the mortgage loan. For this reason, they expect the Lender to manage their Broker relationships to ensure the consumer is protected. They expect that the consumer will receive a loan as disclosed to them by a Broker, regardless of the Lender. That way a consumer can rely on the information provided by a Broker. Otherwise, if arbitrary changes to fees and costs were allowable after registration, the consumer may be harmed. Accordingly, in time, consumers may decide to not use a Broker for their mortgage.
One concern is with the disclosure of the appraisal fee. Lenders deal with various AMCs and appraisers so fees may vary by Lender. This could result in the Broker over-disclosing this fee to ensure they cover a worst case scenario. This is not necessarily good for a consumer as they may choose another Lender with a lower fee but not get the best deal when they go to lock their loan. Nor is it good for a Broker, as they may lose some business due to the higher fee, or be challenged that they did not provide a “good faith” estimate, knowingly estimating the fee at a higher rate.
Could this be considered a fair lending violation, if the fee is not disclosed uniformly? When a Broker is aware of the Lender at application, the Broker could disclose the exact fee as required by that Lender. In a similar case when a Broker may need to evaluate all options before registering the loan, the Broker may be forced to disclose a higher “worst case” fee which may appear as an intended deterrent to the consumer. Stranger things have happened in the world of fair lending and disparate impacts.
Brokers need to figure this one out. Maybe, not take the six items required of an application until they are ready to register a loan. Take all loans as pre-qualification reviews. Once decided, they can then register a loan and disclose the specific fees of the selected Lender. Be careful, as you cannot refuse information or ignore it once offered or received from a consumer. You get the 6, you got an app and must disclose.
- Will Lenders require Brokers to register new applications and disclosure through their system?
- Will they require they issue the Loan Estimate for the Broker after registration?
- Will this process diminish the value of the Mortgage Broker?
- Is that in the best interest of the consumer? I don’t think so.
Time is running out for the Broker to get this resolved. The CFPB has laid down the challenge. Brokers must face it and overcome it. They have done so in numerous instances in the past. I have no doubt they will do so again.
The game has changed; play different.
