President Bush Wants to Expand Mortgage Disclosures

Today’s Wall Street Journal featured an article about the Bush Administration’s plan to expand mortgage disclosures ($), which will give borrowers a clear picture of how much they are paying and what they are paying for. This is a good thing!

According to the article, the Bush Administration had tried to do something three years ago but faced so much opposition from the mortgage industry that they shelved the plan. I guess the mortgage industry loved being able to hide fees from borrowers.

The Bush Adminstration also wants to make changes to the Good Faith Estimate. From the article:

The biggest change is expected to be to the Good Faith Estimate, a document given to borrowers that lists costs such as title insurance, appraisals and other fees. The administration wants a more explicit detailing of mortgage-broker fees and loan terms, such as whether the interest rate increases or if there is a prepayment penalty.

I think these are good things to do. No, they won’t bail out people from their mistakes, but it could help to keep people from making the same mistakes in the future. I don’t understand why the AFFIL isn’t praising these changes. Are they truly the Americans For Fairness in Lending or just another

Broker Fees

One other interesting thing I found in the article:

The housing industry is bracing for HUD’s revised proposal — in particular, mortgage brokers, who are barraged with criticism in the current housing crisis. Members of Congress, consumer groups and others have accused mortgage brokers of steering individuals, including those with good credit, into subprime loans with higher interest rates that benefited them financially.

Brokers often receive fees from the lender when the borrower agrees to pay a higher interest rate than he or she qualifies for. The higher the rate, the higher the fee for the broker, though some lenders cap the amount they will pay. HUD is expected to require more explicit disclosure of broker compensation so borrowers clearly understand the relationship between broker and lender.

President Bush singled out the industry in a speech last month, saying his administration “will soon issue regulations that require mortgage brokers to fully disclose their fees and closing costs.”

Mark Savitt, president-elect of the National Association of Mortgage Brokers, said his industry already provides adequate compensation information. “I don’t know of anybody else in our industry where you completely disclose every dime you make in a transaction, so I don’t know what more we could disclose,” he said.

Regarding Mark Savitt’s comment: I would be willing to bet that the fee disclosure does not mention the fact that the broker makes MORE money from a subprime loan than a regular loan. So, although they may disclose their fees, there’s nothing for borrowers to base those fees on.

I think this is a move in the right direction.

8 thoughts on “President Bush Wants to Expand Mortgage Disclosures”

  1. Currently, the mortgage brokers do show all of their fees on the good faith estimate; however, the way that they are expressed isn’t always easy to see. For example, the points that the broker charges is listed under the yield spread, which is filled in with a number. What many brokers do is put YPS = 1 to 5. This is a full disclosure, but would anyone really know that this means the broker can take a cut of 1 to 5 percent?

    It’s not the fact that there isn’t full disclosure, but that the disclosure is confusing, full of acronyms, and not in dollars or percentages. If you have to put all of the things in a HUD document in actual dollars, then it would make much more sense to most people, and they could actually use the estimates to shop around for the best deal.

    No matter what, this doesn’t preclude the fact that many people still overbought during the pre-bubble days and are now getting burned for it.

  2. … so even more paperwork at closing will fix things ???

    …the paperwork presented to buyers at a residential real-estate closing is already overwhelming. Even well-educated people are rarely able to understand what they are actually signing & acknowledging.

    More stuff to read & sign will NOT help.

    The entire residential real-estate ‘transfer-of-title’ process is a huge mess in the U.S. It should be a relatively simple process, like buying a car — but the process is very heavily regulated & bureaucratized. And everybody gets a cut at the ‘closing’, especially the government… with outrageous taxes & fees. The buyer/borrower usually gets reamed, by design. Prices for Title-Insurance & Title-search are a government-sanctioned ripoff to consumers.

    Reform and simplify the whole process. Real estate transactions are much simpler & efficient in other countries, like Great Britain.

  3. Hey Meg

    There is a company online that solves the disclosure process and makes it transparent from lenders. The consumer site is and has taken off like crazy. I love the free side-by-side lender report that compares mortgage offers from competing lenders. Honest lenders love it too.
    Check it our and let everyone know. The founders name is Meg too!
    Thanks Joan

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