Mortgage brokers asked the Fed for disclosures that are simpler, more uniform and more fair.
The National Association of Mortgage Brokers said it testified before the Federal Reserve Bank in Atlanta Tuesday focusing on requesting a simpler mortgage process with clear disclosure of all fees, as such would make it easier for mortgage prospects to shop for the right loan.
"Unfortunately, the approved disclosure documents for rate, fees, costs and points can be confusing and overburdened with legalese," NAMB representative Kate Crawford reportedly said. "In addition, only mortgage brokers disclose all costs to the consumer. Until there is a uniform way to disclose costs and everyone is fully transparent about their fees it will continue to be difficult for consumers to comparison shop in a meaningful way."
Unlike mortgage bankers and savings institutions, mortgage brokers are required to disclose yield spread premiums.
Crawford noted NAMB has long pushed for a simplified Good Faith Estimate that mirrors the HUD-1 closing statement so borrowers can ensure the closed deal is the same one they initially signed up for.
But brokers deserve greater scrutiny, according to the National Community Reinvestment Coalition.
The consumer group said it secretly sent mystery shoppers to conduct over 100 tests in six markets to determine how brokers treat prospective borrowers.
"NCRC's investigation of broker conduct in the mortgage industry has exposed widespread and blatant disregard for our nations fair housing laws," said coalition CEO John Taylor. The group wound up filing a complaint with the U.S. Department of Housing and Urban Development against Allied Home Mortgage Capital Corp. alleging the national mortgage broker discriminates against African Americans.
The Mortgage Bankers Association agrees with simplification but says any disclosure provisions should consider the different roles brokers and lenders play in the mortgage process, including the functionality difference of funding versus arranging a loan, said Ken Markison, MBA senior director of regulatory counsel and government affairs.
"There are many functional differences between [brokers and lenders] and how they relate to borrowers, such that borrowers should get disclosures from brokers and not lenders," Markison said. "HUD has long taken the position that when brokers arrange loans, any fee from the lender should be disclosed. To the contrary that lenders are exempt from those requirements, we at MBA think that, considering the differences, that is appropriate."
"We at MBA are long committed and very much interested in simplifying the process and in that process consumers should get the most important pieces of information, which is rates, points and closing costs. We don't want to disadvantage mortgage brokers, but, on the other hand, there are functional differences between lenders and brokers that may lead to differences in disclosure requirements."
The title insurance industry also weighed in.
A simpler GFE should mirror the HUD-1 closing statement, the American Land Title Association said in an e-mail statement to MortgageDaily.com.
"Greater transparency and uniform terms will help the consumer better be able to compare costs and services," said Edward C. Miller, ALTA chief counsel and director of government affairs, in the statement.
The National Mortgage Complaint Center, which calls itself "America's Watchdog," recently said it analyzed a sample of 7,500 mortgage transactions representing every state and region in the country and found that in over 60 percent of cases examined, the GFE had extra fees or costs added by the time the borrower arrived at the closing table, and more than 40 percent had a higher interest rate than initially offered in the GFE or by the lender/broker.
The center also said yield-spread premiums are the most abused overcharges -- 85 percent of all borrowers paying a higher monthly mortgage payment because the lender or broker failed to explain yield spreads or rebate pricing to an unsuspecting consumer -- and that it is "astonishing" that bankers are exempted from the requirement to disclose YSPs even though they profit from these.