Mortgage Talking Points

HUD’s been trying to revise RESPA, in particular the GFE, to no avail for over 30 years. Shockingly, it actually happened this time!And now, all kinds of questions are popping up. Such as: Are the new GFE and HUD-1 Settlement Statements effective 1-1-09, as I’ve been hearing? Must the YSP still (unfairly) be disclosed by brokers and not lenders? Must the Originator guarantee that the costs on the GFE won’t change? Is there any leeway?

EFFECTIVE DATE

First off, hold your horses and don’t panic; the whole thing isn’t mandatory until 1-1-2010. Once again, that is 2010 - as in more than a full year away.

…As usual, I cannot believe the mis-information that’s out there about the effective date!

Even the #1 Blog (By: Bonnie Wilt-Hild, Senior DE Underwriter & NAMP Instructor) from the venerable National Association of Mortgage Processors (NAMP) has the date as 1-1-09. That’s right around the corner and the thought is enough to scare the crap out of anyone. I’m hoping she will read my e-mail and correct the date.

So anyway, it’s 2010, okay? But that doesn’t mean you can ignore the whole thing. A LOT has changed. And besides, it will take a full year to deal with software and training.

The NEW FORMS

Before I answer the other questions, here are the links to the new forms along with a Fact Sheet from HUD:

HUD Fact Sheet

HUD’s standard Good Faith Estimate
HUD-1 Settlement Statement

YSP

Are you ready for this? There’s absolutely NOTHING on the GFE or the HUD-1 Settlement Statement that directly addresses YSP. I’m flabbergasted, but Brokers seem to have won this battle. If so, the playing field between brokers and lenders has been leveled a great deal by the new GFE & HUD-1.

According to the actual RULE, however, there is some question as to whether the broker must give the borrower their YSP, if received, on the top of page 2 of the GFE. (I took a copy of Page 287 from the actual rule if you want to see how it reads.)

I am definitely not an attorney and I’m curious to see how this will play out.

TOLERENCE For CHANGES in LOAN COSTS

You can read the allowable tolerances for yourself on page 3 of the GFE. There are some costs that you must honor exactly once they are disclosed; for instance, the loan origination fee. Others fees have 10% tolerance, and there are some charges that you don’t have to guarantee.

In the end, the originators who are completing the GFE are going to have to be much more educated about the borrowers’ costs, along with other program details.

ALTOGETHER

Personally, I think that the new forms are a step in the right direction to increased professionalism in the industry. I can’t say that I agree with each and every detail, but overall, I really like the changes.

If you are an originator - I highly suggest you download the new GFE form and spend some time with it. It isn’t mandatory for an entire year, but I believe it’s worth your time to get a jump-start.

Vicki, a mortgage friend of mine sent me a copy of an e-mail that she had received from Inside Mortgage Finance.  In the Subject line of her e-mail, she was legitimately asking me, “Do I need to get this?”  As the owner of a small mortgage company, she always wants to make sure she’s in compliance.

I’m quoting the first two paragraphs of the e-mail she passed along.  It’s from Inside Mortgage Finance, one of the “big guys” in the mortgage information business:

New Resource! Guide to the New TILA/HOEPA Mortgage Rule: The Federal Reserve Board recently finalized comprehensive new mortgage rules under the Truth in Lending Act (TILA) and the Home Ownership and Equity Protection Act (HOEPA). These sweeping changes extend to all originators and servicers, regardless of how the company is regulated. Note: your systems must be updated very soon to submit HMDA data in January 2009.

The editors at Inside Mortgage Finance have assembled a thorough analysis of this massive new rule to help you adhere to these tough new regulations.

Okay, it’s true, the feds really did publish a new Rule on 7-14-08 that makes quite a few changes to TILA and HOEPA.  But give me a break - NOTHING IS EFFECTIVE UNTIL OCTOBER OF 2009 - A FULL YEAR FROM NOW! And the servicing changes (the ones that take time to implement) aren’t effective until 2010!

Personally, I thought the ad was entirely misleading, selling a $347.00 guide that you don’t need until next year (if at all).  And truthfully, I’m very familiar with the changes; they aren’t all that drastic and they’ll be easy to implement given a couple of months notice.

So … Leslie being Leslie just had to contact Inside Mortgage Finance. My entire e-mail said,

Subject: Inaccuracy, very concerned

The new TILA/HOEPA changes are not effective until 10-1-09, yet you are advertising otherwise to sell “IMF’s Guide to the New TILA/HOEPA Mortgage Rule,”  I’m very concerned that you don’t even know the dates.

I couldn’t believe how defensive the response was from Guy Cecala, CEO & Publisher, Inside Mortgage Finance Publications, Inc.:

We are very aware that most of the provisions in the new TILA/HOEPA rule have an effective date of 10/1/2009 as we have read and analyzed the 400 plus pages of preamble and regulations that were finalized on July 14. Are you suggesting this “final rule” is not new because the effective date is a year away? And are you suggesting we should somehow wait a year and then publish our special report - even though nothing is likely to change in the interim?

What we are selling is a special report that tells people what’s in the final rule the Fed issued back in July - no more, no less. It’s not for us to say whether people should be worried about these changes now or in a year’s time.

Whew, I guess I was put in my place!  So you know, the underlines were mine, not his.  I just though they were rather telling.

And for what it’s worth, the entire RULE is only 94 pages - The preamble is comments made before the rule, and have no bearing on the final rule.

In the end, it’s not the product selling that I mind; I do that myself.  It’s just when a large and supposedly reputable company SCARES you (with pending legal changes) into buying a product that you don’t need.  And I think that’s exactly what they are doing here.

I really don’t like to bad-mouth anyone, but I also have a problem with misinformation that is coming from the mouth of “experts” in the industry.

I’m talking about a seminar that is sponsored by NAMB and is going throughout the country with mis-information that is scaring everyone a little bit. The seminar is a “High Performance Strategies Seminar” and is given by a couple of well known and highly respected industry speakers.

I recently attended one, and personally, I don’t like that the seminar was nothing but a big advertisement for product. There was no real content provided… especially the first half. But putting my personal feelings aside, the first speaker referred several times to the new TIL Disclosure changes effective 10-1-08 - specifically concerning ARM loans. And he talked about how his product would provide the updated version to keep everyone in compliance.

The TRUTH is that the TIL disclosure changes are effective (quoting the actual law) “30 months after the date of enactment of this Act.” Enactment was 7-30-08 and I have a hard time adding that up to be effective 10-1-08. Let’s see… 30 months… that’s about 1-30-2011 if I am adding correctly, and I’m usually pretty good at math.

And about the format of the ARM disclosures [Sec. 2502 of the Housing and Recovery Act] “Prior to issuing any rules pursuant to this clause, the Board shall conduct consumer testing to determine the appropriate format for providing the disclosure required under this subparagraph to consumers so that such disclosures can be easily understood… “

In other words, how can the changes be implemented when the format is still up for grabs?

In all fairness, there are some TIL disclosure changes that are effective 7-30-09. (That’s a year.) I’ve decided to include the details of the required disclosure changes in the next issue of MortgageCurrentcy.com just because people are hearing about it and need to know what’s really going on.

Bottom line, be careful what you believe, especially when someone is trying to sell you something. I adore the second speaker, and honestly don’t like to be gossipy, but I want you to have the real info.

None of the TIL disclosure from HR3221 are effective until a year from now. Honest.

Knights ALWAYS Follow the Code

It floors me that nobody I talk to knows anything about a silly little matter called the “Home Valuation Code of Ethics“. It has such huge consequences! If you want to know about it, read “Will Brokers Lose the Ability to Order Appraisals” at MortgageCurrentcy.com. The bottom line is that unless something changes, no one in the entire production staff can order their own appraisals as of 1-1-09.

Someone e-mailed and asked me who was left to order them… the Seller? I thought it was pretty funny. (Except not.) The answer is ordering through a third party, usually an Appraisal Management Company. In fact, some lenders already require you to do this. It’s the “Code”.

Ya know, I really do have mixed feelings about it. Everyone knows that you order the appraisal from the appraiser who will give you what you need. Right? Don’t you think there’s a conflict of interest when the person picking the appraiser has a commission riding on the transaction? I do.

I also realize that it will wil be a crisis to all of those honest and ethical loan officers who have a favorite (honest and ethical) appraiser because the appraiser is responsive to rushes, letters, whatever. 

Hate to say this, but I still think there’s a conflict of interest.  My struggle is that I think “Code” takes it too far. 

BUT IT DOESN’T MATTER WHO THINKS WHAT.

As of right now, The “Code” is still on for 1-1-09. And if you think about the political environment and the current view of mortgage brokers, it may just happen after all.

And you know what? We’d adapt. (It’s the appraisers I’m worried about.)

I’ll let you know what happens.