Get ready for changes
7/5/2009
In this column for May 2008, I penned some lyrics to accompany Bob Dylan's 1964 song "The Times They are A-Changin" to show how mortgage lending was going through an upheaval, particularly with FICO scores. We are now facing an even greater series of changes that will have significant impact on the mortgage process.
If you want to get money
to purchase a home,
new government regs
will confound the loan.
Beginning July 30
you'll hear lenders moan
bureaucrats rule over the land
with whim and caprice from a house
made on sand.
Mortgage rules, they are a-changin'
The intent of these changes is to bring greater integrity into the mortgage origination process, and by itself, a good thing relative to the larger picture. After all, the implosion within the mortgage markets was caused by loan approvals to borrowers who were marginal or worse in their ability to repay the loan. But I view some of these new changes as Orwellian and political, effected by some czar far removed from the actual mortgage-lending process by experience and political mandate. Some things to look forward to:
The Mortgage Disclosure Improvement Act (MDIA) requires that after receiving a mortgage application, truth-in-lending disclosure documents must me mailed within three business days to the applicant. (This protocol has been in effect for some time, and responsible mortgage providers - both lenders and brokers - customarily follow this requirement.) An additional new requirement stipulates that the mortgage provider wait at least seven business days after mailing or delivery of the disclosure documents before closing on the loan. This can result in closing delays. If the annual percentage rate (APR) on a 30-year, fixed-rate mortgage increases or decreases by more than 1/8 percent, the corrected disclosures need to be delivered at least three business days before the loan can close.
For example, if the loan amount decreases because of inspection issues, or the interest rate increases because the rates went up since the application, there may be a waiting period. With refinances, we often change the loan amount just before closing to reflect payoff figures of the existing loan. This new requirement could delay closings.
Appraisals will be ordered differently, and it is my understanding that the process is different for lenders than for brokers. As a representative for a lender, I cannot order the appraisal. Our support staff will order the appraisal from a pool of approved appraisers that we have selected, and orders are rotated on an equal basis. The good news here is that we will be able to use appraisers knowledgeable in the local real-estate market. Other mortgage providers may be forced to order appraisals through a central agency that uses a much larger pool of appraisers. The risk of this is that the delegated appraiser may not have any familiarity with the local real-estate market, and appraised values may not be truly representative. With purchase contracts dependent on local property value knowledge, surprises are likely.
And this is only the beginning...
Government makes programs
to make things look right
but political agendas
lack vision and sight.
Their new regulations
they pass darkly at night,
our voices they don't want to hear
with a shift in the polls
the new regs disappear.
Mortgage rules, they are a-changin'.
David Hultin (505-946-2521) is a residential mortgage-loan officer for New Mexico Bank and Trust. He previously worked in the mortgage divisions of two of the largest banks in the United States.