Government Intervention - When is enough enough !!!!!

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

disclosures

Disclosure, disclosure, disclosure.....   such a hot topic. Why is that?  Well, HUD has decided to make some new changes to the Good Faith Estimate and to the HUD-1. HUD is stating that these are the first changes in over 30 years. HUD goes on to say that this new regulation should save borrowers $700 at the closing table.  Huh?  I don't consider myself to be naive or stupid when it comes to trying to understand the government's thinking. But how do you come up with $700?

Here is my problem with this new regulation. Not only is it more paperwork, that I think it will actually add more confusion, but that HUD is using a lame excuse so late into a problem that should have been corrected a decade ago. Below are the two new changes, please take a look.

And here is what a current Good Faith Estimate looks like.  Current Good Faith Estimate

 

Here is why I am up in arms about this. HUD Secretary Steve Preston said, "changes in the housing market and increases in home foreclosures demands action."  I agree to disagree. It's all based on HUD's reasons.

 

                                                                                                       Cartoon from CartoonStock.com 

 

 

take a closer look

 

Let's take a much closer look at this. RESPA (Real Estate Settlement Procedures Act) was created in 1974. RESPA is a HUD consumer protection statute designed to help homebuyers be better mortgage shoppers, and is enforced by HUD. RESPA was basically designed to keep those in the real estate business from inflating the prices in order to give kickbacks. .

Here is where RESPA is suppose to protect the consumer. RESPA requires that consumers receive disclosures at various times in the transaction.  For more on RESPA, please read : Real Estate Settlement Procedures Act

HUD believes that many of these foreclosures were due to lenders not disclosing correctly. A good example of this is that if I told you that you were getting a 6.5% rate and that it was fixed, but in reality, it was an arm. Another example is if I told you that your rate of 6.00% was with zero points, but when you got to closing, that you ended up being charged 1 point.

 

 

 

So what is my problem?  Regualtion !!! You need to regulate change and not just make changes. You need to enforce them. Sure, many of us go through audits each year. But why was it never truly enforced?  Example...  when I give the borrower a Good Faith Estimate in the beginning, when they make a mortgage application with me, they get a copy of this.  If anything changes on that GFE, the borrower is suppose to be notified and given new disclosures, and sign them.  Rut Row... there is one of the main problems.  This was not done often, nor was this checked in many audits. If you review the new good faith estimate, it says this....

HUD changes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The new HUD-1 settlement sheet will have the same numbers to correspond with the GFE. And if changes are made, the lender has 30 days to return any fees to the borrower.  Okay, this part might not be so bad. But my frustration with all of this is that they should have been harsh with the disclosure issues in the last 20 years. They should have had one sheet with bold writing on it....

If anything changes from your original good faith estimate… don’t close.  Or, close and report this matter to X,Y, Z. That lender will have 30 days to make any corrections necessary.

 

 

 

My other issue with this? I have no problem with the true transparency or those shopping for mortgages. My fear though, many consumers might even shop themselves out of a mortgage. Just because a loan officer gives you a good faith estimate and helps you fill out an application, doesn't mean that you will close on that loan. I am not trying to scare anyone out there, but this does happen. It happens more often than you think. But here is what HUD did, they have this included with the new forms.

 

hud changes for shopping

 

 

 

 

 

Now, my question to you....  are we over-regulating?  I just think some of this should have been changed a long time ago and that we are blaming the countless foreclosures on this issue. Did we forget that the economy itself has gone down the toilet?  I do agree with this new proposal.

 

This is an excerpt from HUD's finale rule. The GFE will be given to borrowers at the time an estimate is provided and will more clearly answer key questions consumers have when applying for a mortgage:

  • What's the term of the loan?
  • Is the interest rate fixed or can it change?
  • Is there a pre-payment penalty should the borrower choose to refinance at a later date?
  • Is there a potentially crippling balloon payment?
  • What are total closing costs?

 

 

 

My other problem which is talked about in the article below are these so-called "yield spread premiums" which are rarely understood by or fully disclosed to borrowers. Consumers deserve to understand this and they need to get credit for essentially paying these premiums. Again, I think we are adding more confusion to the problem. Those loan officers that don't truly educate their client, will get around this. I can see the explanations being bogus. Just my opinion.

For the whole article, please read :

Remarks by Steve Preston, Secretary of Housing & Urban Developement on the new mortgage rules

 

 

So, what do you say?  What do you want?  How about a true professional that gives you more than just numbers, educates you. Maybe I am just angered at this, because I have been properly disclosing since 1992.  And what's funny is that these changes don't go into affect until January 1, 2010.

In my opinion, if we want to regulate and prosecute, how about going after those that falsely advertise interest rates. Please read --  Real Estate professionals, please don't forget about the laws when it comes to mortgage interest rates and payments. This was written by : Kevin & Maryellen Garasky

 

 

 

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Rainmaker
826,134
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Jeff,

RESPA, even as originally drafted, was a major improvement for the consumer in the home buying process...it is not 'over regulation'...the problem is not 'over regulation' as much as it is 'under enforcement' and 'under prosecution'...!!! JMHO, Thanks,   Fran

Dec 20, 2008 12:25 PM #1
Rainmaker
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Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

I agree with Fran...we can regulate and create laws over and over but if there is no enforcement with teeth, what is the point? 

Dec 20, 2008 12:39 PM #2
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Jeff - If we actually implemented the laws on the books, we would have much less of a problem defining which is which and who is who.  Hell, you can give me all the documentation in the world but lose the fine print.  I rarely trust the fine print.  Then again, welcome to advertising...

Dec 20, 2008 12:42 PM #3
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
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FRAN....  I am not going to disgree that it wasn't an improvement.... but define major improvement. When I said, will it now be over-regulated, I am talking about the new forms. Yes, it's been under enforeced, which is my main point.  It's almost like taking a deck of cards and just shuffling them again to get a different order.  thanks for your feedback.

SUSAN..... . I am agreeing with that. Hence why I decided to write this post. I am not sure if I lost everyone?  The new changes in my opinion could create more confusion and allow for more crap and lies. And yes, the other RESPA rules should have been just enforced...

JASON.... . I agree... let's look at it this way...  why did we not regulate harshly?  Did others behind the scenes have their hands out?  If we took more lenders out earlier, would those states lose more income? Inquiring minds would love to know.  thanks

 

Dec 20, 2008 12:52 PM #4
Rainmaker
826,134
Fran Gaspari
Patriot Land Transfer, Inc. - Limerick, PA
"The Title Man" - Title Insurance - PA & NJ

Jeff,

Major improvement means going from 'Caveat Emptor'...Buyer Beware...to Consumer Protection from many irregularities that existed before the act...illegal kickbacks, no disclosures, no transparency, conflicts of interest, etc...many of which have crept back into the transaction process because of lack of enforcement...!!! SAD!!! Thanks,   Fran 

Dec 20, 2008 01:48 PM #5
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Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
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Jeff- I don't think more regulation from the government who can not even govern themselves appropriately will help to solve anything. It is not the regulation that is the problem is the lack of enforcement of current regulations just as you stated. There will also always be bad guys, scum bags and scam artists and there will always be stupid people who do not do their due diligence no matter how much the government regulates! Just look at the Soviet Union- all their regulations and yet the black market and the mafia was thriving!

Dec 20, 2008 02:08 PM #6
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Jeff Belonger
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FRAN... . I agree with much of what you are saying. And you and I have been on the same page when it comes to these one shop companies. But once you read these new forms, you will understand some of my frustration. Especially about the shopping part. I think you are just asking for some more trouble there. I think loans will be low balled by some loan officers, that just can't do the deal anyhow... and you will see a nasty snow ball effect.  And yes, lack enforement is sad. Hence why I said, will these forms help?  Sure, some, but this crap should have been done 15 years ago. But we had to wait for a major crisis?  lol  SAD

KATERINA...... . I agree 110% also... we all seem to agree that it is the lack of enforement, which scares me even more about these new forms. I think it will hurt the good ones and help the bad ones, that's if this is not regulated. Damn it, if these forms had been out just in 2002, hundreds of thousands of borrowers would have been good to go.  thanks for your input.

 

Dec 20, 2008 11:55 PM #7
Rainmaker
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Robert D. Ashby
Visual Approach Aerial Photography (Visual Approach Photography) - Plantation, FL
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Jeff makes a valid point in that adding more regulation is merely masking the real problem, which is lack of enforcement as most have mentioned in the comments.  Whenever new regulations come out, there is more opportunities for the "lack of experienced" to impose what they think is better for the consumer, and that seldom is in the best interests of the consumer.

There is one overlooked issue that I think needs to be addressed on the new GFE.  That issue is that the new form features a loan comparison chart to assist consumers in shopping for their new mortgage and getting the best deal.  Well, I am just going to have to write a post about it, because it is just that bad and idiotic.

Post uploaded: New HUD GFE Proves Government Has No Clue

Dec 21, 2008 12:00 AM #8
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Paul McFadden
Paratex - Seattle, WA
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Jeff: Thank you. What I've heard is most of this is designed to go after the mortgage brokers of the world. The regulators feel they're the root cause of the current problems in the industry. It seems like the bankers have the advantage right now. Either way I agree with you. Full disclosure is important; nothing should ever be hidden! Take care.

Dec 21, 2008 01:59 AM #9
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Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
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I really think that more legislation or involvement is not needed.  The just really need to prosecute those who are crooks and taking advantage of people.  It's only recently that the white collar crimes in lending have become more persecuted...........

Dec 21, 2008 06:12 AM #10
Anonymous
Barb Van - Keller Williams

These new forms aren't going to save anybody $700!  There is no "check point charlie" on any of this. 

This is where I am seeing the fraud, the deception from the low ball loan companies who dont' give a rats nest about their level of professionalism only how much their "seat" is padded. 

Employment:  VOE is easy.  Have a bogus company that is affiliated and receives kickbacks from the mortgage broker handle it.

Tax Returns:  Heck, why provide the real McCoys when a friend can falsify that information.  So, you sign a document that says that the bank can pull the information from the IRS.  They don't.

Income:  Oh, you need a little extra money so you can purchase this condo?  Not a problem.  We'll falsify your income on your tax returns, create  new 1099's or W-2's and it's taken care of.

Oh, we care about you but this takes time and it costs us money so your rate may be a little higher.  Rate my foot!   I've seen them competitive on these bogus loans with every junk fee out there and a premium that nets them $7K on a $200K loan. 

the appraiser fee?  Quoted:  $250   final:  $450 on a single family home.  I asked for disclosure of the fees and they said it was none of my business. 

These forms are going to do much.  It's how the system doesn't work.  for instance, in Chicago, the computers are known for not be able to communicate to one another.  So, if you are pulling a permit the computer cannot communicate with the qualification/license of the plumbers!

Nothing that has been changed is set up to automatically kick out misinformation or mismatched information on the forms.  One section says:  US Citizen - can't check that only with a license and some other papers (all can be illegal).  Another section says:  Married but it can be different on the form on page three and the system wont' kick it out.

I'd like to know who in their right minds are responsible for these form changes.  Blasted it took so long and what do we get?  More headaches.  New challenges for creating unique ways in which to falsify the information. 

It's about educating the consumer.  It just blows my mind when I see the HUD's coming across my table for final before closing and they don't match up.  I had a file in which everybody including the attorneys wanted to do some cash under the table.  I told them not on my watch!  I was only coaching the realtor who in ways doesn't know right from wrong because if it benefits people all around, then who is it hurting?

And that is why we have these newly revised forms. 

 

Dec 21, 2008 07:13 AM #11
Rainmaker
99,135
Gerry Suarez Jr.
Jet Home Loans NMLS 1660135 - Maitland, FL
FL Mortgage Guru

Jeff,

All the comments are right on, noting the main deficiency we've had is lack of enforcement. I must say the yield spread premium issue does still bother me (look for a future blog on that). That is pretty crazy that they devote an entire section of this new gfe for brokers to disclose YSP yet banks will be assumed by the customer to be working for free. Such is our government though- that's why I'm taking odds on the new gfe not making it once our new HUD director gets going.

Gerry Suarez. Jr.

FHA Loan Pro!

Dec 21, 2008 10:38 AM #12
Rainer
304,164
Cynthia Tilghman, Realtor® Onslow County NC Home Specialist
Kingsbridge Realty, Inc - Hubert, NC

Hi Jeff,
It's true with any and all laws--they are only as good as the enforement.  Personally, I think we'd all be better if the only law in the land was the Golden Rule--seems to me it covers everything.

Dec 22, 2008 10:44 AM #14
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
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ROBERT.... . as many of us agree, new regulation will make this worse or not help. And yes, I was just as upset to see that they are pushing the shopping process. What's sad is that there are those loan officers that will say that we don't want this because we want to charge more money. Wrong, the reason is because it will allow those loan officers that are barely average to hook a consumer in with a low rate and probably screw up the deal.

PAUL.... . well, from how I read it, this will hurt both bankers and brokers. I think the language reads that even bankers / lenders must disclose. I'll go back and take a look...   thanks for your feedback

LARRY..... . amen to the prosecution...  it's been bad so long and now they want to arrest people?  Why not 5 years ago?  Or did we turn a blind eye for so long?

BARB.... . lol...  check point charlie... thanks for the laugh.   But it's so true and when I read about the $700 savings, I just had to chuckle and say, you have to be kidding... And yes, educating the consumer should be the most important. Sad, yet so true...

GERRY..... .  the YSP killed me also....   and I look forward to that blog...  but I am not sure about HUD stopping this... but I guess time will tell...  thanks

 

Dec 22, 2008 10:48 AM #15
Rainer
38,744
Kevin & Maryellen Garasky
KMG Mortgage Group - Kevin & Maryellen, Idaho & Washington - Coeur d'Alene, ID
KMG Mortgage Group - ID & WA

The entire topic just makes me sick.  Ya know, just enforce the stupid laws that already exist!

I guess I just broker in two great states where the laws are enforced.  I have gone through two audits, one with the state of Idaho and one with HUD (well, three then - one voluntarily by a third-party Accounting firm to look at our books).  It wasn't easy, and there were a couple of MINOR things we had to change, but otherwise we came through with flying colors - but, like I said, it wasn't easy.

And, in regard to Paul McFadden's comment: I have worked in a few banks (two very LARGE banks, and underwrote for one of them), I can tell you, WITH ABSOLUTE CERTAINTY, that I am regulated more now as a broker than I ever was with a bank.  It's sad that a few bad apples (very bad apples) ruin for the whole bunch.

Jeff - thanks for the quote.  I'm always flattered when someone quotes me.

Maryellen

Dec 23, 2008 09:33 AM #16
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