Categorized | Finance and Mortgage

Mortgage Lenders Could Face New Regulations

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Federal regulators have announced that there will likely be some changes forthcoming with respect to regulations in the mortgage loan industry. In particular, mortgage lenders will be required to charge a flat fee in order to process loans. Interest rate reduction will be limited for borrowers as well.

Banks are worrying most about the changes to the origination fees. Typically, mortgage loan origination fees vary, and are calculated depending on the loan size. Regulators believe that a move to require lenders to charge a flat fee instead of one that is variable will prevent the lenders from such unethical practices as pushing borrowers to take out higher cost loans that involve a greater commission.

The greatest opposition to the proposed regulations comes from small mortgage lending firms. However, most, if not all of the lending industry is expected to reject the new regulations. They believe that such a proposal would be unfair to those looking to secure smaller loans, as the costs involved would be much higher.

Mortgage brokers will likely see their salaries decrease as well due to the new changes. A significant portion of their income is based on mortgage origination fees. With a flat fee structure, their total commissions will decline.

Regulators are also proposing that mortgage loans be far easier to read for borrowers. They are pushing for loans that do not include the combination of points, fees, and interest rates. By eliminating all the miscellaneous factors, borrowers will have a far easier time comparing loans offered by various banks.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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