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The New Good Faith Estimate 2010

March 3rd, 2010

On January 1st , 2010, HUD implemented a new disclosure designed to simplify the understanding of the cost of a loan.  The document is called GFE 2010.  Many things are different between the old Good Faith Estimates (GFE) and the new one, but here are some of the main differences.

1.  Lenders will no longer be able to just hand out a good faith estimate to a borrower without having these six things:  Property Address, Borrower’s Social Security Number, Borrower’s Monthly Income, Estimated Value of the Property, Loan amount and the borrower’s name.

2.  Once a Lender give a borrower a GFE, all the fees located in Box 1 cannot change.  This is good because there will no longer be any unexpected increase in lenders fees at the closing table.

3.  Yield Spread (money paid by the bank) will no longer be paid to the loan originator; it is given as a credit to the borrower.

4.  All other settlement charges (Title services, appraisals, inspections, etc.) can only increase by up to 10% on the final HUD.  This will also help to reduce deception by some loan originators who would drastically understate these fees.

While the intent of this new disclosure is so that the consumer can more easily shop for a new mortgage, the odds are that it will actually reduce the amount of “shopping” for a new mortgage.  This is because, the borrower must now give your social security number to each company they want a Good Faith Estimate from.  This is so the lender can pull the borrowers credit to make sure they can provide the loan they are giving the GFE for.  Anyone who has ever applied for credit knows that too many credit pulls can be detrimental to your credit score, so many borrowers will just pick one lender (hopefully someone they know and trust) and just run with it.

The other important thing to keep in mind about the new GFE 2010 is that, IT WILL ADD TIME TO GETTING A NEW MORTGAGE!  As with most new government rules, they are difficult for most people (even lenders) to understand.  It is now more than ever, extremely important that you work with a mortgage professional (like The Kunselman Team) that can help you to navigate the mine field of the mortgage process.  One wrong step can blow up the new mortgage.

If you have any more question about the new GFE 2010 or any other new rules, please feel free to contact The Kunselman Team so we can help you understand.

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Posted in Know Your Mortgage, Mortgage Industry, News, Real Estate Industry, Understanding Your Mortgage

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Looking Back at 2009

January 21st, 2010
  1. The $8000 first time home buyer tax credit that didn’t have to be paid back is introduced.
  2. Foreclosures declined but short sales were on the rise.
  3. Stated income loans went away, making it difficult for self-employed income borrowers to get a new mortgage.
  4. New mortgage guidelines tightened up.
  5. Large investors (unless they are cash buyers) got bumped out of the market.
  6. Resurgence of the small/first-time investor.
  7. Resurgence of the USDA 100% financing mortgage for rural areas.
  8. The Government injected lots of capital into the mortgage backed securities keeping interest rates low.
  9. The Government injects billions into the banks in the form of the TARP (Troubled Asset Relief Program) with the intent to modify existing mortgages.  The banks modify only a very small percentage of these mortgages.
  10. Fannie Mae and Freddie Mac introduce the DU Refinance + and the Home Access Programs designed for home owners to refinance who initially had 20% equity when they first got their mortgage and have seen their home values decline.  Program is a moderate success.
  11. Rates went up and rates went down.
  12. The Home Valuation Code of Conduct (HVCC) is introduced in May.  Appraisals must now be ordered through Appraisal Management Companies (AMCs). Many reports indicate this system is very flawed and has lead to higher costs to the borrower in obtaining a new mortgage.
  13. The Mortgage Disclosure Improvement Act (MDIA) is introduced in August.  It gives borrowers more information upfront before any money can be collected, but adds costly time to the mortgage process.
  14. The Government extended the $8000 First Time Home Buyer Tax Credit to June ’10 and added a $6500 repeat home buyer tax credit.  Experts say there will not be any more extensions.

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Posted in Know Your Mortgage, Mortgage Industry, News, Real Estate Industry, Understanding Your Mortgage

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Fewer Rules, More Common Sense 2

September 24th, 2009

If you read last month’s news letter, you might notice that the “Advice from the Mortgage Masters” article is very similar this month.  This was done intentionally because the message still rings true with this months mortgage update.  HVCC and HERA are both examples of good intentions gone bad.

One of the biggest problems facing our country right now is the flood of new laws being put into place.  Because of the state of the economy and incorrect opinions about what got us to this place, many politicians are creating laws based more on what they think will get them more votes instead of looking taking the time to really understand the problem so they can properly fix it.

Here is the inherent problem with trying to solve the problems in our country with more rules.  Every time you create a new law, you create more loopholes for people to get around the laws.  All the laws really do is increase the cost of doing business for those professionals who continue to operate in a legal and ethical way already.  Someone who is currently breaking the law, will just end up breaking the new laws.

What we really need in this country is more common sense.  Instead of creating new laws, why don’t we just give more power to those who have authority to enforce the laws we already have.  Before the HERA was put into place, brokers and lenders were required to give a good estimate about fees and costs associated with a new mortgage.  The real problem was that if a consumer felt that they had been lied to or tricked, they didn’t have an effective way to voice their complaint.

So be patient.  If you are interested in refinancing your home, understand that your mortgage professional would like to get you closed as soon as possible, but things are just taking longer than they used to.

As always, if you would like to see what it feels like to work with a mortgage broker that can bring a little sanity to an insane world, give The Kunselman Team a call.

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On Your Marks, Get Set…Wait!

September 24th, 2009

Anybody that has tried to get anything done with their mortgage recently understands that things have been moving a little slow.  Well good news, the politicians in all their infinite wisdom decided that you the consumer need EVEN MORE TIME to make a proper decision about your mortgage.  The fact that on average a mortgage takes 3-4 weeks to complete and that after you sign documents on a refinance; you still have an additional 3 days to decide whether or not you want the new loan.

The Home Economic Recovery Act (See the name even sounds good) or HERA as it is also known, went into effect on July 30, 2009.  On average we are expecting that HERA will add 5 to 10 days for your new mortgage to close.  What that really means is that now instead of being able to lock rates for 30 days, many loans will have to be locked now for 45 days.  The longer the lock, the more it costs.

Now I understand what the intention behind this new law was to try and protect consumers but they are going about it the wrong way.  There are enough laws on the book.  What would be more helpful to consumers would be to enforce the existing laws.  All the laws in the world mean nothing if they are not enforced.

Something that would make more sense is giving the consumer a way to file a complaint if they feel they were tricked or lied to.  If the Department of Real Estate received enough complaints, then they could investigate a particular broker’s business, instead of changing the rules to punish everyone.  Because as I have stated before, those people who obey the existing laws will obey the new laws and those who don’t obey the existing laws, will not obey the new ones either.  They will just figure out a way around them.

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Fewer Rules, More Common Sense

September 24th, 2009

The HVCC as mentioned above is just another example of good intentions gone bad.  One of the biggest problems facing our country right now is the flood of new laws being put into place.  Because of the state of the economy and incorrect opinions about what got us to this place, many politicians are creating laws based more on what they think will get them more votes instead of looking taking the time to really understand the problem so they can properly fix it.

Here is the inherent problem with trying to solve the problems in our country with more rules.  Every time you create a new law, you create more loopholes for people to get around the laws.  All the laws really do is increase the cost of doing business for those professionals who continue to operate in a legal and ethical way already.  Someone who is currently breaking the law, will just end up breaking the new laws.

What we really need in this country is more common sense.  Instead of creating new laws, why don’t we just give more power to those who have authority to enforce the laws we already have.  Before the HVCC was put into place, it was against the law for any lender or mortgage broker to influence the value of an appraisal.  The real problem was that if an appraiser felt that he or she was being pressured, they didn’t have a strong enough system put in place to give them any power to stand up to that lender or broker.

One more thing; if a law is created and at some point it becomes obvious that it is a bad law, let’s just get rid of it.  We don’t need more laws to get around the bad one.

As always, if you would like to see what it feels like to work with a mortgage broker that can bring a little sanity to an insane world, give The Kunselman Team a call.

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Posted in Mortgage Industry, News, Real Estate Industry, Uncommon Useful Knowledge

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