Are Closing Costs Really Going Up

by Mike Goblet on August 22, 2013

In this video, Mike Goblet from United Mortgage Financial Group sets the record straight about closing costs.

Matt OBrien:  Welcome back to another segment of Arizona Mortgage News, insider update. We have our local expert, Mike Goblet, of United Mortgage and Financial Group. Today, we’re going to talk a little bit about what’s going on with mortgage rates and are the costs of mortgages going up.

Mike Goblet:  Hi, Matt, how you doing?

Matt:  Pretty good, how you doing, Mike?

Mike:  Good. I wanted to take some time today and talk about an article that just appeared in “USA Today” this Monday, August 5th. Their big banner headline was, “Are mortgage closing costs going up?” Pretty attention getting. I really want to address it, because there’s some misstatements and misleading statements in it, and I think this article’s going to get even more play, because the media likes to grab headlines and then play off of that.

With that, right after the headline, their big thing is, mortgage closing costs are on the way up. It further states, origination fees are up by six percent and third party fees are up by one percent. That sounds pretty intimidating to the average consumer, I think. Wouldn’t you agree?

Matt:  I would totally agree.

Mike:  It’s a little misleading. Can you still hear me, Matt?

Matt:  I can. I was just going to pull up this article here, but I’m having a little trouble with it. Don’t pay attention to me.

Mike:  The man behind the curtain, I agree. It’s a little misleading and actually, the generalized statement is that closing costs are going up to a degree. But it’s because they are tied to the loan amount more than any other reason, which goes up because the origination fees that are associated with are tied to a percent of the loan amount. The misleading information and misstatements are in the body of it, where USA Today quotes somebody that said…Somebody inside the industry saying origination fees, which are controlled by lenders, are rising in part because of higher interest rates. That just is not true. It’s a total misstatement.

Actually, the lenders will pay you a greater rebate for choosing a higher loan amount, as we’ve talked about in the past, but origination fees are not tied to interest rates at all.

Matt:  That’s shocking that something that was printed in the newspaper is not 100 percent accurate.

Mike:  I know, if it’s on the Internet or in the newspaper, it’s generally 100 percent accurate. But this is one time, so I wanted to make sure we caught it.

Matt:  We’ll be sure to display this evidence in our post when this goes live.

Mike:  The next statement they make, it says, “As rates rise, lenders make less money on the money they lend and look to make more on fees.” Again, a total misstatement, and that just doesn’t happen. Actually, I don’t know how it could happen. That information’s out there and it gets very misleading. The really stronger one, it says, “Some lenders have no origination fees.” Which is kind of, it’s misleading because of the fact, as we talked about in the past, lenders need to make money. They make it on origination fees more than anything else.

But banks, because of the laws and the lobbyists that help create the laws for banks, they don’t have to disclose how much money they’re making. They make it out of that same yield spread that we talked about in the past, which is the incentive rate that the bank will actually pay the lender to choose a higher rate. But banks don’t disclose that that’s how they get the money.

It’s a very misleading statement and this article is very misleading in terms of what’s driving the differences. It’s really mostly that the housing values are going up and thus, origination fees that are tied by a percent to those fees are going up. Other third party fees are also generally remaining the same.

Matt:  That all makes sense. Good thing we have the expert here to set the record straight.

Mike:  I just be able…As consumers read that, particularly as they go to compare loans with people like myself, mortgage brokers versus the banks that disclose things in different ways. They’re trying to show that the playing field is not level and it actually is much more level than they would like to believe. In fact, most mortgage brokers like myself have an advantage over banks, because we have much less overhead and don’t need to make as much money on each loan.

Matt:  That makes sense. Thanks for setting the record straight on this. We’ll have to get on the horn to USA Today next and let them know that they made a mistake for the first time ever.

Mike:  I plan on calling them right after we’re done here.

Matt:  Right on.

Mike:  I’m sure they’ll take my call.

Matt:  Mike, what’s the best number to get a hold of you? Because I’m sure there are some people that have questions.

Mike:  Yeah, happy to answer any questions and provide specific customized quote to people. Our office number is (480)503‑3533, or you can call me direct on my cell phone at (480)220‑2329. My email address, again, is mike.goblet@umfginc.com, mike.goblet, G‑O‑B‑L‑E‑T, at our company initials, U‑M‑F‑G‑I‑N‑C.com, United Mortgage Financial Group, Inc.

Matt:  That wraps it up. Thanks for another good segment, Mike. We’ll look forward to catching up with you again here in the next week or so.

Mike:  Thanks, Matt, I look forward to talking to you again. I look forward to being able to help anybody who has any questions.

Matt:  Excellent.

Mike:  Have a good day.

Matt:  You, too.

 

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