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New rules make mortgage shopping easier

By Holden Lewis ·
Thursday, April 29, 2010
Posted: 11 am ET

Mortgage companies have to deliver accurate fee estimates under strengthened consumer protections that will be enforced starting May 1. The revised regulations went into effect in January, but the feds gave lenders four months to debug their cost-estimating systems.

Last week I interviewed a mortgage banker who complained about the rules, which he says were written to punish bad guys who already have been driven out of the mortgage industry and are back to selling used cars. I said I understood that he was annoyed -- but, I asked, how do the rules affect consumers? Suddenly he had praise for the new regulations. Very good for consumers, he said. On balance, he thinks the new regs offer an improvement over the system that was in place before.

I was reminded of that interview when I read Joshua Green's description of his loan closing yesterday morning. It was his first closing since 2003.

"In 2003, I remember poring over lenders' estimates for hours trying to spot the junk fees and figure out which deal was best," he writes. "This time the key factors -- interest rate, lender fees, etc. -- were easy to spot because the forms were identical." It took him three minutes to identify the best deal.

This improvement was brought forth through regulation, not through market competition.

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April 30, 2010 at 5:00 pm

Interesting comments from Jonah Goldberg:

"Washington's solution to Wall Street's problems is to get Washington deeply, deeply involved in Wall Street. So involved that the savvier capitalists will recognize — once again — that the safest bets are not to be found in the vicissitudes of a fickle marketplace, but in gaming the system run from Washington. The "reform" coming down the pike will put bureaucrats in charge of investors. If bureaucrats were better than investors, they wouldn't be bureaucrats. The government will decide which firms are worthy — "systemically important" — and which are not. Those that are will use their official "importance" to game the system. Instead of eradicating "too big too fail," we will systematize it.
We are fond of saying that the answer to free-speech problems is more free speech. But we seem incapable of grasping that sometimes — and only sometimes — the solution to capitalism's problems is more capitalism."

April 30, 2010 at 1:15 pm

If I'm understanding Holden's point, it's that the motivation for reform wasn't arrived at via competition solely, but rather government regulation. His final comment didn't seem all that snarky to me; if anything, it's a breath of fresh air. There's far too much anti-government rhetoric out there these days, especially in economic arenas. And there's no reason to assume that government regulation is automatically anti-markets. As both of you point out, there are places where gov't reg. can, in fact, bolster the efficiency of markets and our overall economy. And not enough people give credit to that fact.

April 29, 2010 at 4:25 pm

Agree with Bjorn. The new regs actually are a boon to competition by allowing consumers to assess competing proposals more easily and accurately.....competition is almost always more advantageous for the consumer than regulation.....maybe Courtney's rubbing off on you......

April 29, 2010 at 11:56 am

Holden - A significant portion of this regulation is to bring clarity to market competition.

"'The new GFE unquestionably encourages consumers to shop for closing services," says Tim Dwyer'"

It doesn't regulate what lenders actually do nor does it make it easy to actually see how the GFE compares to the HUD1, as you've stated, it just tries to make it more obvious to borrowers what the lender is doing. This isn't bad -- it's good -- but it just makes your final sentence seem more snarky than is reasonable.