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发帖数: 931 | 1 Closing Cost Scams
NEW YORK (MONEY Magazine) -- Technology has magically lowered the price of
buying everything from stocks to airline tickets. But home buyers now pay
eight times the closing costs they paid 40 years ago. Here's how residents
of one Minnesota street were overcharged again and again on their home
purchases, many by thousands of dollars. And why your street probably isn't
all that different.
When Lewis Leung was buying his two-bedroom ranch in St. Louis Park, Minn.
in 2004, he read up on mortgages. He got rate quotes from lenders on the Web
. He even compared their good-faith estimates of the numerous extra fees he'
d have to pay to close the deal.
But did he sign with the lender who quoted him the best combination of rate
and fees? Nope. Instead, under pressure to get a loan quickly, he went with
the mortgage broker recommended by his real estate agent. Ditto when tapping
a title insurer.
"The agent and I looked at a lot of houses together over the months," Leung
explains. "You build up a bit of trust."
Maybe that trust was misplaced. Going with his agent's advice cost Leung
hundreds of extra dollars in fees and up to $9,320 in higher interest
payments over 30 years.
A bum steer? Not to Century 21 Luger, Leung's agent. The realtor's referrals
netted the agency and its affiliates an extra $3,635 on the transaction,
though Leung didn't know it. This is on top of the $6,150 the realtor
collected from its portion of the seller's commission, plus $189 that
Century 21 Luger said it had to charge Leung to cover its costs.
"I knew I should do it myself," Leung says of his decision to go with his
agent's referrals. "But after months of looking for a house, I was tired,
and I just didn't think it would affect my bottom line all that much."
Mystery charges and buyer exhaustion
Ever bought a house? Then you know what it's like to be confronted, while
making the biggest financial transaction of your life, with a bundle of fees
you don't quite understand. They're enumerated on what's called your HUD-1
document, the mortgage settlement statement you get the day you close, as
required by the Department of Housing and Urban Development.
The charges listed include mysterious things like title insurance,
settlement fees, appraisal fees, processing fees, document-preparation fees
and others, as well as charges paid by the seller, like your broker's
commission. You probably didn't spend a lot of time on your HUD-1, at least
not until it was too late, because all those fees can seem like warts on the
side of an elephant, a few hundred or maybe a few thousand dollars out of a
transaction that runs into the hundreds of thousands.
Together, though, these fees add up. Americans spend $110 billion a year
buying and selling houses, not including the cost of the homes themselves.
And while technology has magically lowered the cost of buying everything
from airline tickets to stocks to wedding gifts, real estate purchases
remain stubbornly expensive. Home buyers now pay eight times as much in
closing costs as they did 40 years ago.
Regulators have begun to ask why. The Department of Justice sued the
National Association of Realtors last fall, claiming that its rigid rules
for home listings artificially inflate commissions. And state insurance
commissioners in California, Colorado, Florida, Maryland and Ohio have
recently uncovered what they say are networks of sham title insurance
companies set up to hide illegal rebates to banks, builders and realtors in
exchange for steering business their way.
Colorado insurance regulator Erin Toll tells MONEY there are probably more
than 100 "shams" -- her word -- in her state alone.
"The current system doesn't work at all," says mortgage expert Jack
Guttentag, a professor emeritus at the Wharton School and head of
Mtgprofessor.com. "Real estate fees are much higher than they'd be if the
market worked properly. The whole thing is something of a tragedy."
One street's story
Many problems with "sham" title insurance companies -- companies set up to
hide illegal rebates to banks, builders and realtors in exchange for
steering business their way -- might have been fixed by now, except for this
most from them.
A tiny agency called the Federal Housing Finance Board is the only entity
that tracks closing costs. But it doesn't collect data to break down numbers
between realtors, lenders and title companies.
And lenders aren't required to file HUD-1 forms at all -- not even with HUD
itself. The only place HUD-1s get filed away, if at all, is in basements,
attics and home offices across the country.
So that's where MONEY went -- specifically, to the basements, attics and
home offices on a single street, Aquila Lane, in a popular suburb just west
of Minneapolis called St. Louis Park.
Why there? Because residents of the entire Minneapolis/St. Paul region pay
more when buying a house than residents of any other metro area in the
country, a MONEY analysis of Federal Housing Finance Board data shows.
Brokerage commissions there are as high as 7 percent, while typical pretax
closing fees, at about 1.1 percent of loan amounts, are more than double the
national average. And folks in St. Louis Park are hammered harder than
those in just about any other zip code in the Twin Cities region.
As part of a four-month investigation, MONEY went door to door on Aquila
Lane, asking people about their home-buying experiences. Forty-two houses
there have changed hands since 2000; 20 of the new owners talked to MONEY,
and of those, 12 shared their financial documents. Most residents never knew
that their closing costs were exorbitant or negotiable or even avoidable.
Based on our reviews of their HUD-1s with industry experts, the 12 Aquila
homeowners would have saved an average of 23 percent on their closing costs
if they'd shopped around, which in many cases would have amounted to
thousands of dollars.
What brokers don't do
Freight trains ran alongside Aquila lane, shuttling goods into downtown
Minneapolis, until 1984, when the rail line was abandoned. Now bike paths
wend where tracks once lay. The adjacent park boasts softball fields, tennis
courts and a popular sledding hill. Even in this up-and-coming bedroom burb
, Aquila Lane stands out as highly desirable.
So when a two bedroom house on the south end of the street went on sale for
$165,000 in 2003, Nikole and Josh Didier stretched for it. On the advice of
their real estate agent, Edina Realty's Chuck Skolnick, they sought a loan
through Edina's affiliated mortgage brokerage.
"Chuck was phenomenal in working with us," says Nikole. "We used Edina for
everything."
That proved to be expensive. The couple's pretax closing costs came to $4,
565, including at least $2,125 in up-front fees that went directly to their
mortgage broker. At 2.7 percent of the loan, that pretax total is nearly
seven times the national average.
Worse, the Didiers ended up with a two-year ARM at a high 8 percent. The
Didiers figured at the time that it was the best their broker could get them
, given some credit problems they'd had.
Turns out they almost certainly could have done better. Mortgage brokers
have no obligation to get their customers the best deal.
On the contrary, they have an incentive to push them toward a mortgage with
an unnecessarily high rate. That's because the bank's payment to the
mortgage broker, called a yield spread premium, compensates the broker for
the spread between the lowest rate at which the lender will make the loan
and the rate the borrower ends up with.
In other words, the higher the rate, the more money the broker makes.
Based on the large referral payment of $3,398 by lender First Franklin to
the Didiers' mortgage broker with Edina, they probably signed up for an
interest rate between one and two percentage points higher than the best
rate the bank was offering at the time, calculates Wharton's Guttentag.
A shocked Josh Didier says today that he didn't even know the bank was
rewarding his broker. "We thought we had paid our mortgage broker up front."
An Edina spokesman calls its payment from the lender on the Didier loan "
customary compensation," adding, "We'd be losing money on this mortgage"
without it. "This loan was compliant within our company guidelines on
responsible lending. It was competitive in the marketplace."
The bunk behind junk fees
These days nearly everyone knows someone -- a brother-in-law, a college pal,
a former hairdresser -- who's become a mortgage broker.
There aren't many barriers to entry. Only about half of all state
governments have any licensing requirements, which, when they do exist,
usually amount to a day or less of training. In the other states, all you
have to do is register and you're in.
The National Association of Mortgage Brokers (NAMB) does have a code of
ethics, but it doesn't do any testing or screening or even require
professional ethics classes.
Beth and Robert Grommesh bought their place at 3049 Aquila in 2005 with a $
522,500 loan. The various pretax fees came to $8,856, or 1.7 percent of
their loan. Among those costs, according to their HUD-1, were $1,265 in
charges for "processing" and "administration."
NAMB board member Jim Pair calls these "junk fees" because, he says, they're
generally not related to any actual service performed by a broker and, if
so, are violations of NAMB's code of ethics.
"As a mortgage broker, I don't perform those services, so I can't charge for
them," Pair says.
Yet such fees can be routine: We found them in 10 of the 12 Aquila purchases
. The long list of names that fees go by (in addition to processing and
administration charges, Aquila residents were hit with application,
commitment, courier, document prep, origination and underwriting fees)
suggests that specific things were done to earn them.
Actually, says University of Minnesota law professor Prentiss Cox, a former
head of the Minnesota attorney general's consumer division, most all of
these fees end up in lender or broker coffers regardless of what a HUD-1
says: "They should just call them 'Pluto research fees.' They're just making
this stuff up."
Toothless regulations
The federal Real Estate Settlement Procedures Act, or RESPA, was passed back
in 1974 to prevent just such a state of affairs. Among other provisions, it
requires lenders to send, within three days of a loan application, a good-
faith estimate to the borrower detailing the interest rate and fees.
In theory, all this information allows consumers to compare offers and
select the best deal. In reality, the law is so toothless that it enables
lenders to ignore their estimates in your HUD-1 come closing day.
"I call them bad-faith guesstimates," says Brian Montgomery, an assistant
secretary at HUD.
When Kevin Slama and Brooke Perry applied for a $213,000 loan to buy their
home on Aquila Lane in 2004, for example, their good-faith estimate for fees
was $4,524. The actual fees turned out to be $7,320 -- or 61 percent higher.
Yet fees aren't the costliest result of the loopholes. RESPA was also meant
to stop realtors from taking kickbacks for steering customers to favored
lenders, title companies, appraisers or home inspectors. But it doesn't
prohibit agents from making referrals within their own firm, as long as the
agent isn't directly compensated.
And the law says nothing about indirect compensation -- or about how much
the agent's employer can benefit from referrals. So the two-decade-long
housing boom has seen firms morph into huge organizations that offer their
own mortgage and title services. Even small shops can have a lending officer
these days.
The result: Almost no one in this arrangement has an incentive to offer
consumers the most competitive price.
Title inflation
On its face, title insurance seems like a fair deal. For around $1,000, a
policy protects you for the life of your mortgage against the possibility
that the person who sold you your home was not the full and rightful owner.
So if, for example, a letter comes in the mail saying the previous owner
never paid off the mortgage and the bank plans to foreclose, no problem: The
title insurer will make the bank whole.
In fact, virtually nobody ever gets one of those letters. Most potential
claims are cleared up with a title search before the policy goes into effect
. Since 1995, title insurers have on average spent less than 5 percent of
their revenue on claims, according to a recent industry report. By contrast,
property and casualty insurers typically pay out 80 percent of their
premiums to cover policyholders' losses.
Given those juicy numbers, why hasn't competition lowered title insurance
premiums? Because home buyers almost never shop prices for title insurance.
They rely instead on recommendations from advisers like real estate agents,
whose firms frequently get a cut of the premiums.
Again, this is made possible by the Real Estate Settlement Procedures Act,
or RESPA, loophole that allows referral payments to in-house or affiliated
service providers. It's fully within the law for realty outfits to set up
their own in-house title agency -- essentially the sales office for a title
insurer -- in return for a substantial chunk of the insurance premium.
Such agents have long argued that they're being paid for substantive title
work, not for a referral. But regulators are increasingly accusing in-house
and third-party agents of being shell companies created solely to skirt
RESPA's prohibition against outside referral payments.
Colorado shut down 11 such entities in November and is investigating some
450 other title agents. And among HUD's 14 major case settlements last year,
13 involved alleged kickbacks in the title insurance business.
Keeping the consumer in the dark
"This is an industry that is not based on price competition," says
California Insurance Commissioner John Garamendi, whose office is also
investigating the title business. "It's based on keeping the consumer in the
dark."
Not surprisingly, most home buyers we spoke to on Aquila paid substantial
sums to in-house or affiliated title agents. When Lewis Leung bought his
house, for example, his Century 21 Luger agent suggested he buy a policy
from Old Republic National Title, one of the country's largest title
insurers.
"She said I could find my own title insurer or use the one that she trusted,
" says Leung.
About $895 went to something called Reliance Title. Reliance -- you guessed
it -- is owned by realtor Jim Luger, who founded Century 21 Luger 30 years
ago.
Assuming industry norms, experts estimate Luger's title agency pocketed 80
percent of the total, passing on just 20 percent to Old Republic, which
carries the risk on Leung's policy.
Jim Luger wouldn't confirm the breakdown, saying it was a private matter
between his firm and Old Republic.
"It's legal and standard industry practice," says Luger of using affiliated
title agents. "The people who come to us get good service and good rates."
Rande Yeager, CEO of Old Republic (and president of his industry's trade
group), echoes Luger's claim that agency relationships serve home buyers
well. As for the industry, "Customers get a good service at a fair price,"
Yeager says.
It's doubtful Leung would see it the same way. He would have paid $250 less,
for instance, had he bought a policy from independent Minneapolis-based
insurer Title-1.
The stubborn 6 percent commission
Galling as junk fees and inflated title costs may be, they are small
potatoes compared with the big money commanded by real estate brokers in the
form of sales commissions -- $65 billion last year. And it's over the size
of sales commissions that the struggle to unleash competitive forces in the
real estate business has been most fiercely waged
The crux of the battle is this: Scores of discount brokerages have opened
around the country offering to help sell your home for much less than the 6
percent commission that traditional agents typically charge. Traditional
brokers who bring would-be buyers into homes represented by discounters
stand to earn a much smaller commission.
Most brokers say they do so anyway: Boycotting certain homes to protect
commission structures would violate their profession's obligation to show
customers every appropriate home on the market.
No-shows with a discounter
Jeff Miller, for one, doesn't believe them. In June he listed his house with
St. Louis Park discounter Home Avenue. Waiting for buyers at yet another
empty open house last September, Miller got the sense that he was very much
alone. His wife Jo had wanted him to go with a traditional brokerage, but he
resisted, figuring, who needs an agent in this crazy market?
But not one bid came in during the time the Millers had their house on the
market with a discounter. Though buyers stopped in to see the place, the
people who really move a house -- agents, who bring in the most potential
buyers -- were largely absent.
Few ever brought buyers, yet each one brought a version of the same story:
Dump your discount broker or your house won't get sold.
"One of the brokers told me that my house was the last one on their list to
show a prospective buyer," says Miller.
Under pressure from his wife, Miller caved two weeks before Thanksgiving and
hired a traditional agent charging a full commission. On a snowy day in
November, 28 agents showed up. No sale as of early February, Miller reports,
but seven potential buyers have been brought in for a look.
Pressure to use full-price brokers
Stewart and Amy Krummen planned to use a discount broker to sell their three
-bedroom Cape Cod on Florida Avenue, but, they say, the owners of the five-
bedroom split-level they wanted on Aquila insisted that the Krummens use
their full commission broker.
Why? The Krummens say they were told the owners were nervous they'd fail to
sell quickly -- and delay the Aquila closing.
In the end, the Krummens acquiesced and paid $17,710 in full commission on
their sale. The Aquila house seller declined to comment; the broker says the
Krummens' purchase was not contingent on their hiring her.
The Krummens remember it differently. Either way, their house sold within 24
hours. Says Stewart, "We paid a lot of money for something we could have
done with a day's work."
Simple solutions to fee bloat
The real problem in real estate transaction costs is greater than what's
happening on Aquila Lane. Home buyers are at a huge disadvantage when they
deal with the realtors, mortgage brokers and title companies they hire. Most
folks buy or sell a house only a few times in their life, so they build up
little knowledge of how the process is supposed to work or how much it
should cost.
Meanwhile, real estate pros have relatively little incentive to treat
customers fairly. Sellers often move, and buyers may not seek another house
for a decade, which is longer than the career life of the average real
estate agent. So unlike, say, a grocer or a hairdresser, agents get little
repeat business.
As the real estate boom enters what looks like a new phase of less frenzied
growth, there's more need than ever for laws that better align the interests
of real estate professionals and their firms with the interests of their
customers.
Bundle services
According to John Weicher, director of the Center for Housing and Financial
Markets at the nonprofit Hudson Institute and a former HUD official in
charge of RESPA regulation, one simple solution would be to allow real
estate services to be bundled.
Realtors or mortgage brokers could charge a single fee for everything a
client needs to buy a house -- loan, title, the works. Consumers could
easily compare fees and rates, pushing lenders to compete on price. Lenders
would also pressure title insurers, appraisers and other service providers
in the same way that Wal-Mart pressures its suppliers.
"If lenders had to buy their own title insurance, premiums would drop like a
rock," says Wharton's Guttentag.
Put teeth in RESPA
Another way to correct the system would be to make lenders stick to their
good-faith estimates. HUD officials, who are working on changing the rules
of the closing game, argue that this could bring down costs because lenders
would have an incentive to offer lower prices, not just lower estimates.
Reform proposals have been floated before, only to be shot down by industry
lobbyists. Maybe it's different this time. The Justice Department has
brought antitrust allegations against realtors. And perhaps HUD's nascent
efforts at reform will make a difference.
A skeptical Allen Fishbein, director of housing and credit policy at the
Consumer Federation of America, chooses to reserve judgment.
"We have a long way to go," he says. "Right now the only competition in the
real estate business is to see who can get the consumer to pay the most."
转自CNN Money
http://money.cnn.com/2006/02/13/real_estate/closingcosts_money_ | m*f
发帖数: 8162 | 2 美国房地产交易这个行业的确太病态，不过也怪这个国家笨蛋太多，让realtor形成了
集体行业垄断。 | g*q
发帖数: 26623 | 3 其实还好吧.8倍这个说法估计是没有把通货膨胀考虑进去.那时候房价才多少钱? | t*****e
发帖数: 15794 | 4 当我为了一捆葱翻来翻去，省下一分钱时，
agent 笑了，
loaner笑了，
insurance agent笑了，
banker笑了，
我因为勤俭节约，
能供个老爷般的大房子，
我也骄傲的笑了，
挖，世界在微笑，
真好。
t
Web
he'
【在 t********e 的大作中提到】
: Closing Cost Scams
: NEW YORK (MONEY Magazine) -- Technology has magically lowered the price of
: buying everything from stocks to airline tickets. But home buyers now pay
: eight times the closing costs they paid 40 years ago. Here's how residents
: of one Minnesota street were overcharged again and again on their home
: purchases, many by thousands of dollars. And why your street probably isn't
: all that different.
: When Lewis Leung was buying his two-bedroom ranch in St. Louis Park, Minn.
: in 2004, he read up on mortgages. He got rate quotes from lenders on the Web
: . He even compared their good-faith estimates of the numerous extra fees he'
| s*i
发帖数: 5025 | 5 带到山花烂米时，她在丛中笑。她，这里是不是指的是costco?
[发表自未名空间手机版 - m.mitbbs.com]
【在 t*****e 的大作中提到】
: 当我为了一捆葱翻来翻去，省下一分钱时，
: agent 笑了，
: loaner笑了，
: insurance agent笑了，
: banker笑了，
: 我因为勤俭节约，
: 能供个老爷般的大房子，
: 我也骄傲的笑了，
: 挖，世界在微笑，
: 真好。
|
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