In this day and age of abundant choices, being mediocre will not get a business very far. With so much competition, everyone is vying for the attention of a consumer in any way possible. More often than not, it is the flashy and attention-grabbing promotions that garner the interest of a would-be customer … but not always does that alone clinch the sale. For the informed and educated consumer, the best outcome is when the business is able to maintain their interest by offering something unique, and of benefit to them. When it comes to the mortgage industry, that value starts with proper guidance – and concludes with dollars and sense!
Today’s “mortgage shoppers” demand the best of both worlds – the greatest advice and the lowest price. A recent survey by BankRate.com a prominent online financial services advisory highlighted the national average for mortgage “closing costs” covering the first few months of 2017. Unsurprisingly, fees were higher than a year earlier, but the particulars were even more astonishing. Much time and effort went into researching the different variables, and what caused disparities in fees. BankRate did a commendable job surveying and evaluating different lenders in each state, an overwhelming task, to say the least. That said, while I certainly have no intention of affronting them, I think their presentation was less than satisfactory from a consumers standpoint.
The Tri-State (NY/NJ/CT) area fared well in comparison to the national average. New Jersey came in with a $2,175 average in closing cost, followed by Connecticut at $2,275, with New York being in the highest tier at $2,648. The fees were broken down into two categories – “Lender fees” and “third-party fees.”
Lender fees included: Origination Points, Commitment Fees, Document Preparation, Funding Fees, Broker-Origination or Lender Origination Fees, Processing Fees, Tax service Fees, and Underwriting Fees.
Third-Party fees included: Appraisal Fee, Attorney or Closing/Settlement Fee, Credit Report Fee, Flood Certification Fee, Postage/Courier Fee, and Survey Fee. The analysis excludes fees such as title insurance, title search, taxes, property insurance, association fees, interest and other prepaid items – all of which should be comparable regardless of which bank or lender a person choses to obtain their mortgage.
As someone who has worked extensively in the industry for two decades, even I had a hard time understanding why certain fees were included as they were, while other items were excluded in comparison. For example, why would the Appraisal fee be part of the third-party fees, while the tax service and document preparation were part of the Lender-related fees. A lender fee should be the fee that the lender “pockets” and directly benefits from, while a third-party fee should be a fee that the lender is in direct control over obtaining, but outsources to a third-party vendor or service provider.
The bank cannot make any money on tax service fees, credit report fees, tax service fees in the same way they cannot make any money on an appraisal fee. That should make the comparison of Lender fee vs Third-Part fee a lot more simplistic. Unfortunately however, there are loopholes and complications. There are specific laws and regulations that prohibit a lender from profiting on a third-party service unless they own or are affiliated with the service provider – and that relationship is explicitly noted. Many a lenders have been fined and penalized for not adequately noting these affiliations and benefits to the consumer’s detriment. Additionally, most lenders do a dreadful job identifying which fees are in their control, versus the control of the clients (or their attorney).
Approved Funding is proud of the fact that we do not have any interested affiliations in any of these services, and therefore are usually able to provide the lowest cost third-party fees. In addition, our average closing cost is well below the national average and state average in each and every category. People mistakenly believe, if you look hard enough, you will find a great deal; but the lesson here is not only where to look, but to know what to look for. We can help. A special shout out to Barbara Yaros.
By Shmuel Shayowitz
Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience including licenses and certifications as certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected].
