In-house lenders at Builders/Real Estate Brokerages

Update 1-27-2015: For Loan Originators: How To Compete Against A Builder’s Lender

In accordance with the 2010 Wall Street Reform and Consumer Protection (Dodd-Frank) Act, the CFPB has recently ruled that builders and real estate brokers must also comply with the 3% cap on lender related costs.

This is a controversial subject or many reasons.

(1) Some closing costs are covered: Builders often offer payment of some closing costs “only” if you use their approved lenders. This stifles your choice of lenders but builders have greater assurance that the property sale will close.

(2) Competition: Is this still a good deal for the consumer if they can’t shop around to qualify and compare or the rates or fees are higher? The CFPB rule should control rates and fees, but builders may still offer other incentives for appliances/upgrades if you use their lenders?

(3) “Appearance of stacked against Buyer”: How does the Buyer know if they could have a better deal?

(4) Monopoly?: This has the appearance to eliminate competition and service.

Other points: About 60% of the new home sales closed for DR Horton using their preferred lenders.

Source: WSJ, 1-11-2013, B3

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