ICE Whitepaper Reveals Hidden Cost of Mortgage Fee Cures

Rhea-AI Summary

Intercontinental Exchange (NYSE: ICE) released a whitepaper titled “The hidden cost of fee cures,” detailing how preventable expenses are reducing mortgage lenders' profit margins. The TILA-RESPA Integrated Disclosure (TRID) rule mandates lenders to disclose all costs and fees associated with home purchases or refinancing. Errors in these disclosures lead to lenders paying the difference, which has significant financial impacts. ICE's analysis of nearly 90,000 mortgages revealed an average of $1,225 wasted per loan on fee cures. The report also noted that more than one-third of loans required fee cures within six months. Additionally, over 31,000 transfer tax changes were documented from 2021 to early 2023, posing operational challenges for lenders.

Positive

• ICE's whitepaper provides actionable insights to help lenders improve their profit margins.
• The study analyzed a substantial sample size of nearly 90,000 mortgages, enhancing the credibility of findings.
• Detailed examination of fee cures and costs provides lenders with essential information to mitigate preventable expenses.

Negative

• Fee cures are causing an average loss of $1,225 per loan.
• More than one-third of the loans reviewed required fee cures within a six-month period.
• Over 31,000 transfer tax changes from 2021 to early 2023 pose substantial operational challenges for lenders.

Financial Analyst

The revelation from the ICE whitepaper highlights a significant issue for mortgage lenders that could have a direct impact on their bottom lines. The average cost of $1,225 per loan on fee cures accumulated over a large number of loans could result in millions of dollars in additional costs, severely impacting profitability. For retail investors, understanding these inefficiencies is crucial, as they can influence the performance of mortgage companies’ stocks.

Short-term, this issue could lead to increased operational costs and pressure on earnings, especially if lenders don't rapidly address these inefficiencies. In the long-term, however, those who can implement effective solutions to reduce these expenses could see a comparative advantage, potentially leading to improved profit margins.

In a competitive mortgage market, where each basis point counts, even small improvements in operational efficiency can translate into significant financial gains. The repeated mention of fee cures suggests a systemic issue, one that likely affects a wide range of lenders, not just a few outliers. This pervasiveness makes the implementation of technology solutions to streamline fee tracking and minimize errors an investment opportunity for companies involved in this space.

Technology Expert

From a technological standpoint, the rising cost of fee cures in the mortgage industry underscores the necessity for advanced automation and real-time data tracking systems. The challenge of adjusting to frequently changing closing costs, such as transfer taxes, highlights the need for robust software solutions that can handle rapid data updates. This situation represents an opportunity for tech companies specializing in fintech and regtech solutions to expand their market presence and provide value to mortgage lenders.

Moreover, the trend of accelerating fee changes suggests a growing complexity in the regulatory environment, which can only be managed efficiently through sophisticated technology. Lenders need systems that not only track these changes in real-time but also integrate seamlessly into their existing workflows to prevent disruptions.

For retail investors, companies involved in creating and implementing these technological solutions may represent a promising investment, particularly those who can demonstrate a track record of reducing operational costs and improving compliance for their clients.

Preventable expenses eroding lenders’ profit margins

ATLANTA & NEW YORK--(BUSINESS WIRE)-- Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of technology and data, released “The hidden cost of fee cures,” a whitepaper based on an analysis of preventable expenses eroding mortgage lender profits.

The TILA-RESPA Integrated Disclosure (TRID) rule, also known as “know before you owe,” requires mortgage lenders to provide borrowers with a detailed accounting of costs and fees associated with purchasing or refinancing a home. Any errors made in the disclosure are the lender’s responsibility to detect and rectify. Depending on the specifics of the errors, lenders may be required to pay the difference between the disclosed and updated costs.

“With origination inching off a 30-year low, lenders need to be as efficient and detailed as possible. Every basis point counts,” said Tim Bowler, President of ICE Mortgage Technology. “Unfortunately, fee cures and the costs associated with them – entirely preventable expenses – are contributing to the already ballooning cost to originate a mortgage.”

Keeping track of frequently changing closing costs, especially transfer taxes, can be a major pain point for lenders. Failure to keep up with such changes can be an expensive proposition. Anecdotal evidence has long-suggested fee cures are cutting into origination revenue and, indeed, an ICE review of nearly 90,000 mortgages found an average of $1,225 per loan wasted on fee cures and related expenses.

Not only is this a significant amount when extrapolated over a lender’s entire pipeline, but the prevalence of such cures is startling. The study also found that over a period of just six months, more than one out of every three loans reviewed for this study required some type of fee cure.

ICE Fee Solutions documented more than 31,000 transfer tax changes from 2021 through early 2023, and the trend is accelerating. These changes can have short implementation timelines, variable schedules, and substantial fee increases, all of which pose operational challenges for lenders trying to rapidly document these changes.

For more information on the true cost of fee cures, how to minimize these preventable expenses to maximize profit margins, download ICE’s latest whitepaper here.

About Intercontinental Exchange

Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500 company that designs, builds, and operates digital networks that connect people to opportunity. We provide financial technology and data services across major asset classes helping our customers access mission-critical workflow tools that increase transparency and efficiency. ICE’s futures, equity, and options exchanges -- including the New York Stock Exchange -- and clearing houses help people invest, raise capital and manage risk. We offer some of the world’s largest markets to trade and clear energy and environmental products. Our fixed income, data services and execution capabilities provide information, analytics and platforms that help our customers streamline processes and capitalize on opportunities. At ICE Mortgage Technology, we are transforming U.S. housing finance, from initial consumer engagement through loan production, closing, registration and the long-term servicing relationship. Together, ICE transforms, streamlines, and automates industries to connect our customers to opportunity.

Trademarks of ICE and/or its affiliates include Intercontinental Exchange, ICE, ICE block design, NYSE and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located here. Key Information Documents for certain products covered by the EU Packaged Retail and Insurance-based Investment Products Regulation can be accessed on the relevant exchange website under the heading “Key Information Documents (KIDS).”

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 -- Statements in this press release regarding ICE's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings, including, but not limited to, the risk factors in ICE's Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 8, 2024.

Source: Intercontinental Exchange

Category: Mortgage Technology

ICE-CORP

View source version on businesswire.com: https://www.businesswire.com/news/home/20240523300870/en/

ICE Media Contact

Mitch Cohen

mitch.cohen@bkfs.com

+1 704-890-8158

ICE Investor Contact:

Katia Gonzalez

katia.gonzalez@ice.com

+1 (678) 981-3882

Source: Intercontinental Exchange

FAQ

What is ICE's latest whitepaper about?

ICE's latest whitepaper, 'The hidden cost of fee cures,' focuses on how preventable expenses are eroding mortgage lenders' profit margins.

What rule requires mortgage lenders to disclose all costs and fees?

The TILA-RESPA Integrated Disclosure (TRID) rule requires mortgage lenders to disclose all costs and fees associated with purchasing or refinancing a home.

How much are lenders losing on average per loan due to fee cures according to ICE's study?

According to ICE's study, lenders are losing an average of $1,225 per loan due to fee cures.

What percentage of loans required fee cures within six months of review?

ICE's study found that more than one out of every three loans reviewed required some type of fee cure within six months.

How many transfer tax changes did ICE Fee Solutions document from 2021 to early 2023?

ICE Fee Solutions documented more than 31,000 transfer tax changes from 2021 through early 2023.