Typically when prices drop, retailers see sales rise as consumers take advantage of stronger buying power. But the mortgage market is in a curious place. Interest rates are at historic lows, but sales remain flat. The reasons are many – tighter lending standards, sinking home prices and foreclosures all contribute to a flat real estate market.
But another factor may be the rise in closing costs. Bankrate.com was quoted in the syndicated Real Estate Weekly (http://contentthatworks.com/realestate/overview.php) as reporting that closing costs had risen nine percent this year over 2010. The reason? Compliance.
“The enhanced due diligence lenders are performing on loan applicants is translating into higher lender closing costs,” says Greg McBride, senior financial analyst with Bankrate.com in North Palm Beach, Fla. “Lenders are required to be precise in quoting their fees on the Good Faith Estimate, which is also a contributor to the higher quotes borrowers are now seeing,”
With more regulatory pressure on banks comes the need for adding more staff to keep up with the new rules – overhead costs that often are passed on to borrowers.
DocuTech COO Scott Stucky also contributed to the article, saying that the wave of pending regulations meant that closing costs were not likely to fall anytime soon.
“The regulatory environment for lenders isn’t getting any less stringent,” says Scott Stucky, chief operating officer with DocuTech Corp., a mortgage document company based in Idaho Falls, Idaho says. “This will continue to require additional resources from lenders, and these are not revenue-producing resources. Therefore, one can assume the overall cost of originating mortgages will go up, which will increase the cost for the borrower.”
Read the full article online at the Las Vegas Review Journal (http://www.lvrj.com/realestate/increasingly-close-131037373.html?ref=373).