Settlement service fees for mortgage originations haven’t budged much since new Real Estate Settlement Procedures Act policies took effect at the beginning of the year, according to a new study.
Ernst Publishing Co. conducted a survey of 226 lenders from Oct. 11-16 to gauge price ranges in county recording fees and vendor- and lender-controlled origination fees.
According to the survey, 57.5% of respondents said county recording fees increased 5% or less during the past 12 months. Like the low increase in recording fees, 55.7% of respondents said vendor-controlled fees such as appraisals, credit checks and title searches increased no more than 5%. In addition, 51.4% reported lender-controlled fees didn’t increase more than 5%.
Those responses contradict a common misconception that the new good-faith estimate led to higher costs for borrowers, Jan Dalton Clark, vice president of the Half Moon Bay, Calif.-based firm, told National Mortgage News.
“We heard outcry from our lender clients that the perception is that they have increased fees because of RESPA and borrowers are paying the price,” Clark said.
In reality, she said, the estimates on the GFE are now more accurate. Previously, lenders used baseline prices that generally underestimated fees. RESPA holds lenders accountable for cure violations between the GFE and HUD-1 closing document and the lender must reconcile any settlement services that cost more than 10% of the price quoted on the GFE.
“Before the new RESPA regulations, borrowers would go to the closing table and find out they had $2,000 in charges that weren’t quoted correctly that they had to pay,” Clark said. “What we’re seeing now is that the fees are accurate on the GFE.”
Indeed, 45% of survey respondents said the perception that closing costs were higher was the result of more accurate reporting on the GFE. But 36% said it was the result of higher closing costs and 18.2% said neither impacted fees, “the GFE is as inaccurate now as it ever was.”
The old method of underestimating fees wasn’t a tactic to try to dupe consumers into thinking their fees were less than competitors, Clark said. Rather it was, and remains today, an issue of constantly evolving fees. Ernst Publishing tracks recording fees and county taxes in the nation’s 4,100 recording districts, as well as follows legislative changes that will impact county recording practices. In addition, Ernst has partnerships with other data providers to track inspection and title fees.
Fee data was used in 14.9 million mortgage transactions since 2008. During that time, Ernst boasted an average 85% market share for its services among the nation’s top 10 mortgage lenders, according to its internal transaction volume as a rate of published national mortgage activity. In addition, 45 of the top 50 mortgage lenders are clients.
Ernst’s lender clients access that data with software connected to their loan origination system to pull the most recent fees before a GFE disclosure is generated for a borrower. In 2009, the company recorded more than 10,000 changes to its database—87% of which were fee-related.
The survey also asked lenders what they think will happen to fees next year. Most—47.3%—said they expect fees to remain stable, while 38.7% said they expect closing prices will “rise or fall dramatically during the next 12 months.”
For inspection and title services, the number of times fees change is three or four times greater than county recording fees, because of the larger number of providers in the space.
“The fees are a moving target,” she said. “It’s a competitive space, so many times the fees can go down.”
