A Little Humor Regarding The RESPA Changes

This poem is making the rounds in the mortgage and title communities. Enjoy and best wishes for a happy and prosperous new year!

T’was the week before New Year’s

When all through the lands,

LO’s and Closers were wringing their hands.

RESPA changes are coming,

They all started to worry,

We’d better get trained, and get trained in a hurry!

We all kept on hoping

There would be a delay.

But HUD said, “No Way,” it’s all here to stay.

“We love our new HUD

And our new GFE,

Don’t fret, don’t worry, it’s as simple as can be.”

We all shook our heads,

Threw our hands to the sky.

What were you drinking? You must have been high!

You took a one page doc

And changed it to three.

Easier? More simple? How can that be?

The Regs don’t match up,

So now what do we do?

HUD says, “No comment, It’s all up to you.”

No info on TILA,

HMDA, REG B.

We are totally confused, why can’t they see??

In a time when some borrowers

Think lenders are scary,

You’ve given 3 pages to make them more wary.

This doesn’t make sense,

Not one little bit.

We are all trying hard to not throw a fit.

So we will all do our best

To put borrowers at ease.

But make more reform, please, please, please!

Please bring someone in

Who knows just what to do.

What is best for both borrowers AND lenders too.

We are all still waiting,

Though not holding our breath

And hoping the government doesn’t “Reg” us to death.

So, on this week before New Year’s,

I’d like to wish you

Good luck with RESPA, I need it too!

The Truth About FHA’s Reserves

Contrary to what many sources are reporting the FHA insurance pool is not at this point where they will need a government bailout. And it is unlikely they will need a bailout in the forseeable future. What most people don’t realize FHA is the only agency of the Federal Government that actually makes money.

The recent audit of FHA showed the mutual insurance pool had a balance of only .57% of the outstanding loans, well below the Congressional mandate of 2%. Unfortunately this is the only part of the audit that most people look at. Even the auditors state that it is highly unlikely the insurance pool would run out of funds.

The biggest item that everyone seems to want to over look is the .57% is only the “Capital Reserve Fund”. FHA also holds a “Financing Account.” When you add the funds in both accounts it totals $31 billion which is actually 4.5% of the outstanding loans. Twice what is mandated by Congress.

There are people saying that we need to go to a 5% down payment and a 3% annual MIP premium. On a $200,000 loan buyers would have to come up with $3000 in additional down payment and the monthly mortgage insurance would go from $91.66 to $500. These proposals are absolutely ludicrous because it would force most buyers out of the FHA market.

FHA has already taken the steps that are needed. Through their changes in the underwriting guidlines they have been able to raise the average credit score from 633 to 693. The other major step was the elimination of the non-profit down payment assistance programs which had a default rate of 20.6%. FHA has taken the proper steps and a little patience will prove that FHA is moving in the right direction and that they will play a crucial part in bringing this country out of the recession.

Consumers Finding Shopping Mortgages Getting Tougher

Consumers have been taught, in many cases by the Realtors they work with, that they should shop multiple lenders. Today many consumers are finding rate shopping of little help in finding the best mortgage. A few of the reasons why:

1) First, a lot of lenders still use bait and switch tactics to attract business. They know when a consumer calls they won’t be making application that day so they can quote what rate they want and the next day when the client calls back they can simply say the “the market changed”.

2) For most of this year lenders have been getting rate changes on average every four hours.

3) Lenders are making quotes without knowing all the factors they need to know in order to make a valid quote. I’m talking about credit score, debt ratio, income, and a whole list of other variables.

4) The rules that go into effect with the new Good Faith Estimate (GFE) January 1 say that a lender who issues an estimate must have an application and can not change certain charges including the origination fee for a set number of days. So how many lenders are going to issue a GFE without the customer having a firm sales price and loan amount? So much for shopping for closing costs. I think this will open consumers up to making an application and then finding their costs are higher that they should be.

In today’s enviroment I’m seeing more Realtors referring their clients to specific lender partners who they know will treat their customers fairly, who know the business, and will get the deal done. When you think about it when you hand a deal to a lender you are basically trusting your commission to them.

There has never been a time that a partnership between Realtor and lender has been more important.