Bankers Continue to Fight Honest Home Loan Disclosure Closing Costs

In the battle to provide home loan estimate costs that closely reflect the reality at closing, major banking groups like the Mortgage Bankers Association, American Bankers Association, the American Escrow Association, the American Financial Services Association and the Consumer Mortgage Coalition, sent a strong letter to Housing and Urban Development Secretary Shaun Donovan saying they were confused at the proposed implementation of a new law going into effect in January that would require closing costs to be within 10 percent of the estimate or the potential buyer of the home could sue for the amount over 10 percent.

According to Jeff Lazerson, president of MortgageGrader.com, responding to the push from the banking community to delay the implementation of the law, financial institutions that would be the beneficiaries of a delay are those who would cheat.

“This forces all lenders to stick to our quotes,” said Lazerson. “You have to eliminate the opportunity to bait and switch borrowers.”

In the letter sent to Donovan, the banks claimed they were not ready and the enforcement of the new law would lead to a “train wreck” in the mortgage market.

One problem with all this is this is nothing new to the lenders, as it has been openly talked about and worked on for about seven years.

Evidently the problem seems to really be the majority of banks were counting on continuing these practices, and were projecting some of their profits based on past performance from these understated fees which rose significantly at closing.

One major bank, Wells Fargo (NYSE:WFC), has already responded to the changes by programing them into their computer systems, so back up the proposed law by stating if not all banks are required to disclose within the parameters of the new law, it would give a competitive advantage to those who don’t have to.

The reason why that statement was made was because it seems those in the banking lobby have influenced one or more people on the House Financial Services Committee to delay the laws implementation through legislation to be introduced soon.

Another major banking source of revenue has been attacked as well, with pressure on banks to disclose any account fees that may be part of doing business with the banks. Much of this centers on the overdraft fees banks include with checking accounts which in many cases aren’t communicated to customers.

As far as the new law requiring accuracy in closing cost fees, it’s due to be put into effect on January 1, if no new delays are legislated.