• Privacy Policy
  • About Us
  • Contact Us
  • Home
  • Business
  • Computers
  • Gear
  • Real Estate
  • Review
  • Technology
No Result
View All Result
  • Home
  • Business
  • Computers
  • Gear
  • Real Estate
  • Review
  • Technology
No Result
View All Result
Cartographeum
No Result
View All Result

Two Alternatives For The Lending Industry

Tomi Mccarthy by Tomi Mccarthy
September 30, 2020
Home Real Estate
Share on FacebookShare on Twitter

CEO of States Title, the family of companies using technology to make the residential real estate closing experience instant and affordable.

getty
Fannie Mae and Freddie Mac recently announced that they would charge lenders an “adverse market refinance fee” on refinancing loans with an original principal amount above $125,000. This fee goes into effect on December 1, 2020, and will drive up the cost of refinancing for borrowers. At a time when consumers are leveraging lower interest rates to save money, they are being asked to pay more for the privilege. This announcement is symptomatic of a more significant issue in the real estate industry: how we price services.
The adverse market refinance fee is reportedly in response to the coronavirus pandemic’s effects on the market. But is the fee protecting these government-sponsored enterprises (GSEs) against a new risk? Covid-19 is a new type of crisis, but it is not the first crisis the market has ever faced. Economic turbulence happens for several reasons, and businesses have always had to safeguard to ensure that they can survive the peaks and valleys. 
Our industry has a long history of confusing fees, and it has contributed to the closing transaction being one of the biggest pain points for consumers. Homebuyers find the process “painful and overwhelming.” Title insurance, for instance — my professional field— is opaque. When I closed on my first house, I asked many questions about title insurance. The more answers I got, the less I understood the rationale for it, and the more uncomfortable I felt about its value. When you purchase a home and the previous owner also had title insurance, it would seem logical that your fees would be lower because the risk is lower, but that is not true. Rates are based on property value, not risk. 
Historically, the various pricing methodologies for title insurance have resulted in rates going up, not down. This fact will strike many consumers as odd because the risk has not increased. In an area like Southeast Florida, where safer construction materials were needed to withstand natural disasters, an increase in the price of homeowners insurance (which protects the structure of the property) would seem to make logical sense due to the increased rebuilding cost. However, paying a higher premium for residential refinance title insurance on a home that’s been refinanced three times in the last 10 years, where the only change is the property’s value, is not logical. 

The sheer amount of fees and financial information results in complex transactions for consumers. Is the pain necessary, or has it become part of an ingrained ecosystem? I would argue that everyone benefits except the consumer.
The adverse market refinance fee illuminates the inefficiency of the industry. The new fees are being implemented to help the GSEs keep pace with demand. Rather than modernizing the process to improve productivity, the industry charges consumers more for an inefficient workflow. The current process is largely manual and relies on a series of human touch points. Technology can eliminate that inefficiency by reducing human touch points and the potential for errors along with them. In this way, we could solve the underlying problem while increasing profit margins, and there would be no need for consumers to pay more. 
Take Netflix, for example. It is an entertainment company that both produces content and distributes content that has been produced elsewhere. The adverse market fee would be like Netflix charging an extra fee for content that isn’t proprietary to make up for the distribution’s inefficiencies. But, of course, it doesn’t need to do that because it has created efficiency in its own content production, which makes up a significant portion of the total available content. 
For now, it’s clear that the adverse market refinance fee will become a reality. There are two steps the GSEs can take, though, that I believe will better serve consumers and the industry. The first would be for the GSEs to earmark some of the proceeds from the fee to go back to both lenders and consumers in the form of longer-term incentives to provide safe and efficient lending capacity. For those lenders that find ways to more efficiently serve a broader market of borrowers with more affordable long term products, the GSEs could pay back some of the adverse market refinance fee to the loan originator and to the borrower. Over an extended period — one to five years — this would prove that the refinance was the right product for that borrower as demonstrated by no material increase in default/foreclosure rates for those loans versus others. 
The second step would be for the GSEs to establish new technology adoption standards for the mortgage origination process’s core elements. Lenders could demonstrate proof of implementation to reduce the adverse market refinance fee on loans that utilize streamlining technology and qualify the lender for a reduced fee. This reduction would incentivize lenders to embrace modern-day methods that, in turn, speed up their pace of technology adoption. All of this results in better customer experience for the borrower while also significantly increasing the lender’s efficiency.
Bottom line: Now is the time to actively pursue solutions that will make it easier for consumers to conduct real estate transactions. It is time for a new normal that makes sense for the customers we serve.
Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?

Tomi Mccarthy

Tomi Mccarthy

Next Post
Gold plunges ₹ 1,492, silver tanks ₹ 1,476

Rupee settles 10 paise higher at 73.76 against US dollar

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recommended.

‘Investments in data centres grow to $396 mn’

‘Investments in data centres grow to $396 mn’

November 19, 2020
TikTok Sale: China Said to Rather See US Operations Close Than a Forced Sale

TikTok Sale: China Said to Rather See US Operations Close Than a Forced Sale

September 12, 2020

Trending.

Understanding Emergency Rental Assistance For Landlords And Tenants

Understanding Emergency Rental Assistance For Landlords And Tenants

January 27, 2021
Facebook Bars Deceptive Campaign From Pro-Trump Group

Facebook Bars Deceptive Campaign From Pro-Trump Group

October 10, 2020
Nirmala Sitharaman press meet live | Centre announces Atmanirbhar Bharat Rozgar Yojana for formal sector

Nirmala Sitharaman press meet updates | Finance Minister announces 12 schemes to boost economy

November 12, 2020
Call of the mall – The Hindu

Call of the mall – The Hindu

October 16, 2020
Missing Middle Housing Is A Huge Opportunity Offering Resilient Investment And High Demand

Missing Middle Housing Is A Huge Opportunity Offering Resilient Investment And High Demand

February 17, 2021

Cartographeum brings you the latest information about Tech,Real Estate & Business.

Follow Us

Categories

  • Business
  • Computers
  • Gear
  • Real Estate
  • Review
  • Technology
  • Uncategorized

Tags

Amazon Apple Watch 2 Bombay stock exchange BSE Business Buying Guides china closing trade coronavirus Covid COVID-19 currency dollar rate economy Finance Ministry foreign exchange forex gold india indian economy Indian stock market Industry iOS 10 lockdown luxury homes market and exchange markets nifty Nirmala Sitharaman NSE oil pandemic Playstation 4 Pro rbi real estate Reserve Bank of India rupee rupee rate Rupee value rupee vs dollar sensex Sillicon Valley stock exchange Stocks USD

Recent News

Brotherly Bonds Through Selling San Diego Real Estate

Brotherly Bonds Through Selling San Diego Real Estate

March 6, 2021
How Your ‘Free’ Buyer’s Agent Increases The Cost Of Homeownership (And What Homebuyers Can Do)

How Can Landlords Prepare For 2021?

March 5, 2021
  • Privacy Policy
  • About Us
  • Contact Us

© 2021 JNews - Premium WordPress news & magazine theme by Jegtheme.

No Result
View All Result
  • Home
  • Review
  • Computers
  • Gear

© 2021 JNews - Premium WordPress news & magazine theme by Jegtheme.