Talking RESPA to consumers

In a lenghty post on her ActiveRain blog, Brentwood, Tenn.-based Countrywide Home Loans originator Donna Mitchell warns consumers and real estate pros about "preferred" lenders. The post touches on many other pitfalls HUD says it's trying to address in its RESPA reform proposal). A few highlights:

That 'preferred' lender your builder or real estate company recommends or has 'in-house,' and that guy the 'financial expert' radio announcer promised would give you a 'great deal'... Well, he may be ripping you off," Mitchell says.

"YOU CAN TRUST THE NUMBERS. And trust the numbers ALONE," she advises, recommending that consumers "Start in the morning and get written, dated, Good Faith Estimates from the 'preferred' lender, and from two different major lenders ALL ON THE SAME DAY."

The post continues:

"You can probably trust the lender who is willing to sit down with you and go line by line over every fee on ALL of the Good Faith Estimates from the different lenders and explain why it may appear the bottom line is higher or lower than the others. Get your three estimates together, show them to all three lenders, and tell them 'LUCY! You've got some 'splaining to do!' "

Just what HUD says its hoping the new GFE will better enable consumers to do. Mitchell also advises her readers to watch out for last-minute changes to third party fees -- an issue HUD proposes to address by imposing tolerances on estimates provided in the GFE.

"Call a title company or closing attorney to get an estimate of the third party' fees you're going to pay. 'Third party' fees are the fees you have to pay at closing that don't come from the lender (deed transfer taxes, tax stamps, recording fees, title insurance, etc). The title company can tell you if they are accurate on the Good Faith Estimate or not. ... If a banker low-balls a fee, all they have to do is smile at you and say it was an 'estimate' when you call hysterically from the closing table and you find out the fees were WAY higher than you were planning on."

Watch out for affiliated businesses and "preferred" title, escrow or closing companies, too, Mitchell advises consumers, promising more on RESPA in future posts.

She says that once or twice a year, Realtors and builder's representatives should take a customer aside and ask to see the Good Faith Estimates they are getting from their preferred lender.

"You'll get to see for yourself whether the lender you are staking your reputation on is competitive on rates and fees. Be smart and make sure the estimates are dated the same day. If the fees aren't within a couple hundred dollars of the others, you should ask what's going on. If the rate isn't better than or within a quarter percent of the others', your customers aren't going to trust you anymore once they find out."

Mitchell is, of course, out to land business (she admits she loves being a preferred lender herself). But her attitude exemplifies the spirit of a competitive marketplace like the one HUD thinks it can create through its proposed RESPA rule changes:

"I always tell my customers to feel free to get as many other estimates and talk with as many other bankers as they like," she concludes. "I'm not afraid to compete because I know I'm charging a FAIR price for a FAIR product."