The following is a press release issued by the non-profit Massachusetts Association of Buyer Agents regarding the Consumer Financial Protection Bureau's proposals to make applying for a mortgage more consumer friendly.
Boston, MA – October 16, 2012 – While generally supporting the Consumer Financial Protection Bureau’s (CFPB) new proposals aimed at simplifying the mortgage application process and protecting consumers, the Massachusetts Association of Buyer Agents (MABA) has gone on record criticizing the bureau’s new proposal on mortgage disclosures – the so-called “Know Before You Owe” proposal.
“In and of itself, changing the disclosures will do little to help consumers looking to comparison shop prior to locking in a mortgage,” said MABA’s board of directors. “The fact of the matter is that unless buyers can get information on loan costs, such as interest rates, monthly payments, and closing costs earlier in the transaction process, it’s all for naught because there is rarely enough time to shop for a better deal the way things are currently set up.” According to the CFPB, this was one of the primary drivers for overhauling the mortgage disclosures – that is, to make shopping for a mortgage easier and more efficient.
The board’s statement continues: “As things now stand, lenders can’t provide a good faith estimate of loan costs until they have an application in hand, which means there needs to be a property with an accepted offer or purchase and sale agreement. In order to give buyers time to comparison shop, that needs to change, as does the timeline for mortgage contingencies – typically made tight to protect the seller’s interest. Consumers need more information sooner in order to effectively shop for a loan. In short, they need to be able to get disclosures in a meaningful way – at a meaningful time. There needs to be a way to get a buyer a binding good faith estimate earlier in the process – perhaps based on certain conditions, such as a single-family up to a certain price and/or a certain credit score range.”
The MABA board also weighed in on two other CFPB proposals – one pertaining to loan origination fees, the other designed to prevent mortgage servicer mistakes. Here, the MABA board was more supportive of the CFPB’s efforts to bring clarity to the mortgage marketplace and prevent the kind of abuses that contributed to the 2008 financial crisis, though it did offer some additional criticisms – and recommendations.
A key element of the new loan origination rules requires lenders to offer a no point, no fee option. According to the CFPB this, again, is being done to help consumers to mortgage shop. However; as the MABA board sees it, the real issue here is that many consumers don’t understand how loans are really structured and, thus, have a hard time making comparisons. “Consumer-friendly lenders can easily calculate the costs of any product to include a no point, no closing cost option. Some do it all the time. The problem is that most consumers don’t understand how mortgage pricing works. By helping with mortgage pricing, a good buyer’s agent can add value to the process.”
Regarding the proposed new rules on mortgage servicers, the board said: “Fundamentally, these rules are designed to protect homeowners from surprises and costly servicer mistakes. It’s a good step in the right direction. One question not answered, though, is what happens if the lender does not follow the correct steps and forecloses on a homeowner.” The board recommends that there be a requirement that lenders present proof that all procedures were properly followed in a timely manner before they would be able to complete a foreclosure. “The bottom line: none of these rules will work unless there are timelines attached to them and penalties or incentives that will get the lenders to follow them.”
The MABA board of directors plans on submitting its comments to the CFPB shortly for its review. The public has been invited to comment on the new CFPB proposals at its website –www.consumerfinance.gov/notice-and-comment/. The CFPB will review and analyze all comments prior to issuing final rules in January 2013. The specific CFPB proposals referenced above can be accessed online at www.massbuyeragents.org/new_mortgage_rules_2012.htm.
About the Massachusetts Association of Buyer Agents (MABA)
Founded in 1990, the Massachusetts Association of Buyer Agents (MABA) is a non-profit organization of select real estate agents dedicated to the highest ethical standards of buyer agency. Less than one percent of the buyer agents in the state qualify for MABA membership. MABA agents advocate for buyers at each step of the process – from initial negotiations through closings – when purchasing a home or condominium. With their comprehensive knowledge, member agents are a critical resource to first-time buyers, those moving into the state through relocation, and repeat buyers seeking to streamline the purchase process. When working with home buyers, MABA agents’ allegiance is to the buyer only and their transaction – never to the seller, the seller’s agent or the listing brokerage company. For additional information on MABA and a free list of MABA buyer’s agents, go to www.massbuyeragents.org.
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For record, I have been on the Massachusetts Association of Buyer Agents Board of Directors since 2010.