Update On New Government Regulations

A few issues back, I wrote about a new government
regulation called the Mortgage Disclosure Improvement
Act (MDIA). It calls for new procedures to tighten
the Truth In Lending disclosures and provides the
borrower with times to digest the information they
are provided before they can close the transaction.

The regulation takes effect with applications that
are begun on or after July 30, 2009. Our lenders
have provided more detailed procedures that will
offer some clarity to everyone's expectations on
how escrow closings will now be handled.

Here are some of the key provisions of MDIA:

* No fees except a bona fide and reasonable credit
report fee may be collected from the borrower
until the lender has mailed the Initial Disclosure
and three full days have passed. The day the
disclosures are mailed is not counted as day 1.

Key Point:

This will, in most cases, delay the ordering of
the appraisal that a borrower pays for until after
the time requirement has been met.

* The law requires that the lender is responsible for
the disclosures. In those cases where we broker the
loan to the ultimate lender, the time frames will be
determined by the lender's disclosures. In the case
of our creating the loan using our mortgage banking
capabilities, we are the lender for this purpose, and
we control the disclosure timing exclusively.

Key Point:

Real estate agents have recommended for a long time
that potential buyers go through a loan application
and get pre-qualified and pre-approved, before engaging
in a home purchase. Now, more than ever, borrowers
need to heed this advice so that we can be beyond
some of these time limits and move quickly, or plan
on much longer escrows to close their transactions.

* Any time there is a change in loan terms causing the
Annual Percentage Rate (APR) to vary by 1/8% or
greater (up or down) from the previous disclosure,
the lender must re-disclose.

Key Point:

All parties are going to need to work together and
commit to their fee structures for things to go
smoothly. Escrow fees, title insurance and endorse-
ment fees, notary fees, messenger costs, in addition
to the lender fees need to be as precise as possible
to stay close to the 1/8% APR variance. A big
variable that may be difficult to nail down originally
is the pro-rated interest for the portion of the
month in which the loan funds. This figure also gets
calculated into the APR and may trigger additional
disclosures.

* If there is a re-disclosure that is necessary due to
the APR changing by 1/8% or greater, loan documents
cannot be signed until another specific 3 business
days have passed from the borrower's receipt of the
re-disclosure. The term specific business day is
defined as Monday through Saturday, with Sunday and
Federal holidays being excluded.

Key Point:

Most of the regulatory provisions talk about the
Truth In Lending documents being delivered by US
Mail. The presumption is that once mailed, they
are considered received by the borrower three days
after. So if a re-disclosure is required, three
days will pass before "receipt" and another three
days for review of terms will transpire before loan
documents can be signed.

We are seeking clarification to see if e-mail
delivery can be meet the delivery requirements to
shorten the initial 3-day "mailing" period.


All of our lenders are struggling to define procedures
that they can administer to be in compliance. Many of
the terms outlined above only came to us in the last
couple of days.

If you are involved in a new transaction over the next
30 to 60 days, you may find that your transaction will
be a test case to work out all the details.

All of us need to give realistic forecasts to help
our clients develop their expectations. It would not
be surprising to see modifications to these procedures
and all of us having to adapt to unanticipated changes.

Stay tuned...!

Customer Service in Today's Mortgage World

If you have participated in a mortgage transaction
in the last year, you probably found it to be a
frustrating experienced.

I know that those of us with long mortgage careers
have found it to be particularly annoying. In my
32 years of doing home loans, I don't think I have
ever seen the overall service in our industry drop
to this level before.

The mortgage business is not simple. But it can
be made easier to navigate when you get all of the
service providers pulling in the same direction. A
seasoned professional can make it look simple when
they have a team of service-oriented professional
seach doing their job, and being mindful that there
is always a client who has a need that must be met.

Let me go through a typical transaction to give you
an idea of what is going on today.

THE CLIENT: You have a goal or a need. You want to
purchase a home with financing, or want to refinance
your existing loan to take advantage of lower rates,
or availability of equity, or both. You use your
past experience or network of acquaintances to find a
loan originator to help you.

THE LOAN ORIGINATOR: This is my role. I succeed by
cultivating and maintaining a relationship business.
I want to be and need to be responsive to your requests
and questions. I need to have an understanding of what
loan programs are available, what it takes for a client
to qualify for them, and how to adapt your personal
qualifications to the lender's underwriting guidelines.

I need to be able to anticipate any problems, help you
brainstorm solutions, and make appropriate suggestions
as to what I think will be the best solution for you
based on your risk tolerance, time horizons, and quali-
fications.

THE LOAN PROCESSING STAFF: To put a face on it, this
would be my assistant and support staff in our loan office.
She works with me (and several other loan originators) to
facilitate the paperwork for presentation to the lender.

She and I work closely together, sharing information
about your particular circumstances and details about
the proposed lender's guidelines. We each bring to
the other's attention new information that we have
received about loan program changes so that we can
make the most efficient and thorough case for you that
we possibly can.

We are both on the same page about providing the best
possible service that we can to you, the client. Very
rarely is there a customer service breakdown at this
level, and when there is we make sure we correct it
quickly.


THE LENDER: This is where the customer service disconnect
begins. The lenders have been inundated with loan
requests. They have been slow or unable to hire sufficient
qualified staff to move the loan request through the
pipeline efficiently.

Add to this bottleneck the reality that lenders are coming
out of a troubled lending environment. Many bad
loans were created when underwriting was very lax, and
as far as the pendulum had swung toward laxity, it now
has swung the other direction to rigid enforcement of
guidelines. The lenders are very nervous about making
mistakes when approving loans.

We have even had some of our lenders tell us that every
loan needs to be reviewed by a senior underwriter. This
puts the entire pipeline through the eye of a needle!

It also creates the situation where we receive written
loan approval by the underwriter, and make plans with
you to finalize the paperwork that has been requested.
Then, a day or two later, we get an updated approval
that asks for additional paperwork, or expressing a
concern that we were not originally aware of. It is
always troubling to have to ask the client for more
last-minute paperwork, or to back-pedal on what we
thought was a solid loan approval.

Government regulations have not helped either. Since
May, we have had a new appraisal system that was
dictated to us by way of FNMA and FHLMC, the Attorney
General of New York. The lenders have been doing their
best to give us reliable procedures to follow. But they
have bank regulators looking over their shoulders, and
because they are concerned about being compliant, every-
thing has been moving more slowly. And the supportive
team that included competent service-oriented appraisers
has been dismantled and replaced with a panel of
appraisers with various levels of qualifications and who
have no commitment to me to perform with the care that
you deserve.

A big part of my professional approach to creating loans
for you was to have a network of representatives from
my roster of lenders with whom I could discuss your loan
file and make sure that what I was proposing was do-able
with them. This allowed me to get reliable answers at the
inception of the transaction and help you have a clear idea
of what to expect.

In today's environment, even my lender representatives
are gun-shy about offering opinions that won't be countered
when the file reaches the underwriter (or review under-
writer!). The typical answer I get now is "Just submit
the file and the underwriter will tell you if it will
work or not".

Before all of the bad loans came to light, the lenders
were very nurturing of their relationship with us loan
originators. Now that they are buried with business,
extremely conservative, nervous about the regulators,
and unsure of how to comply with the new requirements,
their focus is to have a file that leads them to a defensible
decision, whether that is an approval or adecline. So,
they put much less value on providingservice than they
do on covering their 'bases'.

Doing business in this manner is contrary to how I
have built my business. I don't like not having
answers for my clients, or to feel like we are just
twisting in the wind while we await a decision from
the underwriters.
I do appreciate those of you who have maintained confidence
in my services. I hope you know that I have not changed
my approach to business, but things have radically changed
behind the scenes. I make mistakes, but I do everything
I can to rectify them as quickly as possible, and your
interests are always in the forefront of my mind.