Florida Mortgage Brokers are BUZZING About MORE Regulation

More Regulation! That’s the BUZZ I’m hearing around the water cooler and on the mortgage blogs. I’m referring to new regulation that went into effect on January 01, 2010. We are NOW just hearing the feedback. It has some of the Mortgage Brokers here in Florida feeling that regulators in Washington continue to blame them for the real estate financial meltdown that happened three and a half years ago. The new regulation falls in the area of disclosures to the consumer. Regulators are trying to make it easier for the consumer to understand who is getting paid what, and how much they are really being charged for their mortgage. Specifically, this relates to two disclosure documents – the Good Faith Estimate (GFE) and the Truth in Lending (TIL) disclosure. Now, to a consumer this sounds all well and good, but let me tell you every coin has two sides.

Let us talk first about the new GFE. The new GFE in a nutshell forces lenders and mortgage brokers to disclose the exact amount of money that they are making on the transaction. It forces lenders to line item Yield Spread Premium (YSP). This is the amount of money paid to the mortgage broker (from the lender) hidden in the interest rate that you as a consumer are paying for – the higher the rate, the higher the YSP. The new GFE is an improvement in this area and does do a better job defining what we call third party fees. Third Party Fees are the fees from everyone else involved in the mortgage process. It’s this mortgage brokers’ opinion that this was something that needed to be done a long time ago anyway. With that being said… the majority of consumers will still not understand the new GFE detailing YSP, Origination Fees or Mortgage Broker Fees – no matter how many times it’s explained to them. Therefore, this really isn’t the thing creating the buzz between mortgage brokers. It’s the new rules regarding the TIL.

The TIL focuses in on primarily one thing… APR. The APR (Annual Percentage Rate) is a calculation of Interest and Costs over a one year period of time. The new regulation states that IF the APR at the closing table has changed as much as .125% from the APR in the disclosure documents, the lender has to redraw the loan documents. This has mortgage brokers BUZZING, because they don’t get paid should the loan not close. AND, it’s another reason for a loan NOT to close. Here’s why. First and foremost, mortgage rates are reset everyday. Secondly, the loan closing is tied tighter to an estimate. The GFE is just an estimate of everyone’s costs to do your mortgage. It’s nothing more than an ESTIMATE!

So, what does this all mean to you? Well, remember I said earlier that every coin has another side? This means that you as a consumer have fewer choices. Loan Officers and Mortgage Brokers will LOCK your loan the day they issue you a GFE. No longer will you have the luxury of a better rate should rates dip from the time of disclosures to close. Now days, you are looking at a three to four week minimum to close a real estate transaction. Sometimes, if a short sale is in the mix… you can expect up to six months. That DREAM HOME you brought to the closing table could be LOST at the blink of an eye due to costs coming in higher than expected. COSTS will effect the APR!!! Loan documents are time sensitive and will have to be redrawn. Banks will pass this expense back to you. IF a redraw of docs are required, it could take days or weeks to get back to the closing table. YOU as a homebuyer would FORFIT your deposit because YOU are now OUT OF CONTRACT regarding your purchase agreement! The seller would have every right to keep a good portion of the money you put down (20%). This LIST goes on and on and on!!! Mortgage Brokers are already fleeing in droves because they can no longer make a living in the Mortgage Business. YOU as a consumer will no longer have the LUXURY of having the Mortgage Broker shop for the BEST rate. You’ll be forced to get whatever the bank gives you. You’ll have to deal with ONLY the banks in your home town. More government regulation always means less freedom! I don’t mean to paint a bleak picture here. The problem is that currently, the regulators (Government) and the Mortgage Industry in general – don’t know what to do! That’s the Florida Mortgage BUZZ!!!