New rule would refund some mortgage fees

The Federal Reserve has proposed a rule that would give consumers the right to cancel mortgage applications within three days and get refunds of fees.
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Under the proposed rule, consumers could apply with two or more lenders, pay various fees, then cancel all but one application and get refunds from the rejected lenders. Application, appraisal and other fees would be refundable; credit reporting fees would not be refundable.
According to Bankrate's 2010 Closing Costs Study, the average appraisal costs $377, while application fees average $343. Credit report fees -- which would not be refundable -- averaged $18 in the Bankrate survey.
Most lenders bill borrowers directly for credit reports and appraisals. Some, but not all, lenders charge application fees.
Jeff Lazerson, president of MortgageGrader.com, an online brokerage based in Laguna Niguel, Calif., says the proposed rule's impact might be blunted by the fact that most reputable lenders wait three or more days to collect fees anyway.
"For the consumer, it's not bad, because it's going to help pave the way for them to find their best loan," Lazerson says. "For the lenders it's going to make them a little crazy because they're going to be spinning their wheels a lot ... but we end up doing that today, anyway."
The proposed rule was "well-telegraphed," says Dan Green, loan officer for Waterstone Mortgage in Cincinnati. That's why his company, and many other lenders, already wait three days before they charge fees.