Applying for a Sacramento Mortgage will take a little longer... at least until we get this mess straightened up!

Starting with applications taken on or after July 30, 2009 the new Federal TILA disclosure procedures will take effect.  The new rules are designed to make sure that the borrower is 110% informed and aware of all features and costs associated with their loan request.  Although the intent is good, the delivery continues to add costs and time to an already slowing process. 

This is a very new rule and I will attempt to explain it to you... although it is somewhat of a moving target right now!

New 2008 additional clarification, requirements & restrictions
(Mortgage Disclosure Improvement Act of 2008)

Initial disclosures must be delivered to borrowers within 3 business days of application/contract for all mortgage transactions. These must detail the material terms of (a) finance charges; (b) APR; (c) amount financed; (d) schedule of payments; (e) total payments.

OK... that is normal.. no changes there!

If the borrower is physically handed the disclosures, they are considered received.  If the disclosures are mailed they are considered received 3 business days after the date mailed.  

OK... that is doable

Prior to these disclosures being "received" the only fee that can be imposed on the borrower is the cost of a credit report. 

Ohhh that is a problem!

So what you care telling me is if I am working with a borrower out of town, I can't order the appraisal for 3 days from the time I mail the disclosures. Ahhh come on! You couple this with the already screwed up HVCC process and now we have a real issue.

Most contracts written in California have a standard 17 day contingency release period for loan and/or appraisals. So let's count it down shall we!

Let's use the scenario above..

Day 1: In contract /Review client file and request items from client
Day 2: Waiting for clients documents
Day 3: Clients documents in/ Print and mail disclosures to client (out of town)
Day 4: Waiting to order appraisal/Continue to track down contract and preliminary title report
Day 5: Waiting to order appraisal
Day 6: Waiting to order appraisal
Day 7: Yeah! We get to order the appraisal/All items in and ready to submit the loan for approval
Day 8: Waiting for appraisal and approval
Day 9: Waiting for appraisal and approval
Day 10: Waiting for appraisal and approval
Day 11: Waiting for appraisal and approval
Day 12: Waiting for appraisal and approval
Day 13: Waiting for appraisal and approval
Day 14: Waiting for appraisal and approval
Day 15: Approval in/Conditions requested from the client/Still waiting for appraisal
Day 16: Appraisal in/Still trying to gather conditions
Day 17: Conditions back to the lender with appraisal
Day 18: Waiting for the final approval...

**** Keep in mind...Often times when buying a Sacramento bank owned home, it can take much longer to get the contract and preliminary title report. I have also optimized the time it usually takes to get client's information back. All of these small delays just push this time line out further to get your Sacramento mortgage.

BUT DO YOU GET MY POINT THOUGH?
By the time you get to the contingency release deadline for the loan and/or appraisal...you never really got any where. Yes you have confirmation your borrower is solid, but just because the appraisal came back at value does not mean the underwriter won't rip the report to shreds and kill your deal.


So based on this scenario... How can a borrower release their contingencies comfortably?

The biggest problem we have seen since this new rule is that the lenders are running around with their heads cut off trying to implement these new procedures. I have a couple of files that came in last week and I have yet to be able to order my appraisal on some of them.

Here is what happened to one of my files...

First, I was told to upload my file to start the time clock... OK 

Then when my 3 days were up... I went to order the appraisal... I was told I now needed to fax in my approval, credit report, disclosures signed by the borrower, and then the time clock would start.  What! ?You just told me....

To say the least this last week has not been much fun as I am juggleing what the lender are telling me and trying to relay bad information back to all parties involved. Ahhhhh... but in the end I still love what I do!

The moral of the story?

Ask for a 45 day escrow and ask for more than 17 days to release your contingencies (loan and appraisal). Be safe! You can always close early. Trust me... any Realtor selling a lot of homes in Sacramento area is running into this same problem. How do I know? Because I have been on the phone with them all week!

There is more to this story... 

If the loan fees becomes inaccurate by more than 1/8%, new disclosures need to be signed and the borrower must wait at least three days before signing docs. However, that assumes personal delivery of the corrected disclosures.  If the correct disclosures are mailed, then assume they are received 3 business days after mailing which means the borrower can't sign their loan docs for 6 business days. 

The tough part about this is there are fees involved that we as the mortgage pro can not control! 

Fees like...

• Lenders fees
  As a mortgage broker, we may not know when the disclosures are prepared which lender would best fit the particular scenario... so our numbers are a pure estimate.
• Cost of the appraisal
  Often times I don't know the cost until the appraisal management company is determined.
• Escrow fees
  With our current Sacramento foreclosure market it can take weeks to get that information.
• Prepaid interest
  This figure is determined based on the close date.
• Interest rate
  This is not always locked when the disclosures are printed.

Talk about hitting a moving target!

I am sure I will have more to share as the first round of these files hit this next stage... but I will leave that for another day!

Happy Hunting!

This blog by:

Team Newington
Sacramento Mortgage Planners
First Priority Financial
(916) 687-6868

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