mortgage

New rule would refund some mortgage fees

Help or hindrance?

However, Brian Koss, executive vice president of Mortgage Network, in Danvers, Mass., is critical of the proposed rule change.

He says the rule is "meant to protect the consumer, but will end up costing them more and causing confusion and pain."

According to Koss, "All it's going to do is delay anybody from doing anything." Lenders will merely delay ordering appraisals, Koss says, "elongating the process."

The Fed, in its proposal, acknowledges the rule could slow things down. But a similar right to a refund already applies to home equity lines of credit, and it "does not seem to have caused undue delays or burdens for consumers," the Fed proposal says.

The proposal has a 90-day comment period that ends in mid-November. Sometime after that, the Fed may amend the proposal and seek more comment, adopt it with or without amendments, or shelve it. There is no deadline for a final decision.

The proposed rule faces one specific potential bump in the road. At some point, the new Consumer Financial Protection Bureau, or CFPB, will begin operating. It will have the prerogative to alter or withdraw the proposed rule. But the CFPB is likely to draw its staff from existing regulatory agencies, including the Fed.

Shift in emphasis

This rule is an example of a change of emphasis from regulators. In past years, mortgage regulations were designed primarily to stop lenders from treating consumers unfairly. Rules blocked racial discrimination and overcharging for fees.

Regulators still go after discrimination and overcharging, but in the last two years the emphasis has shifted to making it easier for consumers to shop and compare mortgage offers.

For example, a 2008 rule clarifies the way finance charges and annual percentage rates, or APRs, are calculated. A 2009 rule requires lenders to provide good faith estimates when the borrower initially applies, and again whenever the APR changes by one-eighth of a percentage point or more.

Since the beginning of 2010, lenders have been required to use a revamped format for the good faith estimate. The new GFE encourages borrowers to shop for competing quotes of rates and fees.

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