The Federal Reserve has proposed a new rule that may make it easier for prospective homeowners and those looking to refinance shop around before making a commitment.
The proposal, which was part of a 930-page document published mid-month in the Federal Register, would allow consumers to cancel mortgage applications within three days and get refunded for certain costs.
Things like application fees and appraisal fees would be refundable, while credit report fees would not.
Mortgage shoppers would be entitled to refunds if they canceled an application within three business days of receiving key disclosures, including the Good Faith Estimate and Truth in Lending Act statement.
The Fed believes such a rule would help consumers shop for the best deal, instead of being locked in with one mortgage lender for fear of losing any up-front costs.
But many lenders believe the rule will have little effect, as most already wait several days before charging any fees.
Others are concerned it could delay an already backed-up process, as there will be a waiting period before anything is acted upon or ordered.
Although, it’s not uncommon for a loan to be “on hold” until it makes it through underwriting and receives a formal decision.
It’s unclear how the rule would affect mortgage brokers, those who work on behalf of banks directly with consumers.
A recent Bankrate.com study found that mortgage closing costs rose more than 36 percent this year, with loan origination fees rising nearly 25 percent and third-party fees jumping almost 50 percent.