New rules: equal fees for all

Since the Dodd-Frank Act passed in July 2010, lenders have been scrambling to comply with provisions of the various financial reforms. In particular, under Mortgage Reform and Anti-Predatory Lending (Title XIV), lenders have been busy formulating policies, getting their staffs appropriately licensed and retooling their disclosures.

One consequence of these changes is that loan officers and brokers will have much less discretion over the pricing that they can quote to people who are shopping for a refinance mortgage. Prior to reform, mortgage brokers or loan officers could price loans in a way similar to automobile salespeople -- that is, they could quote higher mortgage rates and fees to some borrowers, and lower ones to others. After reform, loan agents will not be allowed to earn more by selling a riskier loan or one with a higher interest rate.

Why some people might have paid more for a refinance mortgage or new home loan

Why would a borrower do this? For several reasons, actually.

• The deal was iffy. Someone wanting a $40,000 mortgage with iffy credit, a spotty work history, and a small down payment promised to be a much tougher challenge than someone with perfect credit and 20 percent down. Also, the tough loan was still quite likely not to close (meaning all the effort would have been for nothing). The loan agent might have only made a hundred dollars or so after weeks of work. In that case he or she may have quoted an extra point to make the process worth undertaking. Conversely, an applicant with a big loan and no issues might have been offered a much sweeter deal because there was a bigger payoff and a lot less work involved.
• The loan officer was busy. Another reason for pricing differences was the volume that a loan agent was dealing with. In busy times, he or she may have been willing to make less on each loan because there was more volume.
• The borrower was hard to deal with. We're all human, including your loan officer. If you were polite and your loan officer liked you, you could get a better deal than if you came across as demanding or unreasonable.
• The agent was opportunistic. Finally, some loan officers would charge more whenever they felt they could get away with it -- unfortunately sometimes to minorities, the elderly or the less educated. That is the abuse that the reform legislation was designed to combat.

How to get the best deal on your mortgage today

When comparing mortgage rate quotes, you won't be able to negotiate Good Faith Estimate lender fees line by line. That's because if you get a better deal, everyone else gets a worse deal, which is not allowed. However, you still need to compare quotes between different lenders. That is where you will be able to nail down the best interest rate and lowest fees, by comparing different lenders' products and going with the best one. So while you won't need great negotiating skills, you will still need to shop, either in person or by using a site like GuideToLenders.com.