10 Ways New Regulations Make Buying a Home Harder

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1. Higher processing costs

The costs for loan origination — the process from loan application, processing, to disbursement of the money — have soared. Loan origination expenses — including commissions and compensation — rose to $8,887 in the first quarter of this year, according to the Mortgage Bankers Association. In comparison, the average cost to originate a loan in 2008 was about $5,985. An MBA-PricewaterhouseCoopers paper on mortgage servicing in 2014 said the cost to service a performing loan, or one not near default, nearly tripled to $156 per year in 2013 from $59 in 2008 to to $156 in 2013. These costs are passed onto consumers in one form or another. According to the paper, the higher costs are the result of greater scrutiny from regulators. To remain in compliance, loan providers have “bolstered processes, quality assurance, and customer-facing practices […] and those changes have manifested into rising servicing costs based on industry averages.’’

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2. More paper work

Because of the Dodd-Frank Act, borrowers and lenders must provide more documents relating to loan applications. Borrowers must document their current employment status and debt levels. Lenders must disclose all the costs involved in each loan, and they must verify a borrower’s ability to repay the mortgage. Lenders are also required to inform mortgage applicants they can receive a free copy of whatever appraisals, reviews, computer valuations, and other data used in the transaction.

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3. Longer wait for mortgage approval

It takes longer for lenders to process the most basic loans today because of greater scrutiny from federal regulators. The average large bank underwriter could process about 165 loans per month in 2005 but can only do about 33 a month today, according to a study by the Mortgage Bankers Association.