Imagine that you’re playing a game where the rules constantly change, and everybody is always confused about them (including the rule makers). Welcome to the 2018 mortgage industry! Here are three ways some of the new mortgage rules impact your business as a real estate professional.
#1 – TILA/RESPA Integrated Disclosures (TRID)
Closing delays are one of the many unintended consequences of recent government regulation. Mortgage lenders are required to prepare a “Closing Disclosure” and adhere to the timelines illustrated below. Any last-minute changes to your deal structure could cause delays of up to a week on purchase transactions, and up to two weeks on refinance transactions. Delays can be even longer if your transaction takes place anytime close to a federal holiday.
Here are five things you and your clients can do in order to avoid unnecessary delays:
- Write a longer timeline into your purchase agreement so that you don’t have to amend the purchase agreement later on.
- Make sure your purchase agreement is properly worded if you have seller concessions or seller-paid closing costs (last-minute changes will re-set the timelines back to the beginning).
- Lock your interest rate for a longer period of time because rate lock extensions are likely to trigger new disclosures and re-set the timelines back to the beginning.
- Schedule the inspection and the appraisal as early in the process as possible in order to give the buyer and seller enough time to make adjustments if necessary.
- Turn in your paperwork ASAP so that unforeseen issues don’t cause more delays.
#2 – CFPB Crackdown on MSAs and RESPA Section 8 Violations
The CFPB has recently fined lenders, title companies, and real estate companies for violating the Real Estate Settlement Procedures Act (RESPA). Section 8 of RESPA prohibits kickbacks and referral fees. In recent years, the Consumer Financial Protection Bureau (CFPB) took over the jurisdiction for enforcing RESPA. Their approach has been very aggressive… particularly in relation to Marketing Services Agreements (MSAs) that often exist between lenders and real estate agents.
The CFPB’s interpretation of RESPA seems to be different from HUD, who was the previous regulator with jurisdiction in this area. The most notable difference is the CFPB’s recent references to a “referral-neutral” policy with MSAs. This basically says that there’s a violation of RESPA if the purpose of the MSA is to generate referrals (even if the fair market value is paid for services). In other words, the CFPB is now looking at your intent when you form the MSA! They’ll be scouring your emails and combing through your records to find out if you or the lender entered the MSA in order to increase your referrals.
It may be time to consider a new approach to strategic partnerships. The key is to enter relationships where both parties are working together to reach consumers, instead of leaving it to one party to do all the heavy-lifting. Contact me to learn more and schedule a time to discuss how we may work together in a way that’s fully compliant with the CFPB’s new rules.
#3 – New Underwriting Guidelines.
Underwriting requirements have been relaxed for buyers who come in with less than a 20% down payment. Also, FHA has relaxed its guidelines for condo projects. These two factors can be very useful, especially in light of the low inventory problem being faced in many housing markets. For example, a buyer may be able to use a low-down payment loan program in order to bid more for a house and make his/her offer more competitive. According to a recent study published by the New York Federal Reserve Board, housing affordability among people who currently rent improves by a whopping 40% when down payment requirements are reduced. This is great news for homebuyers who qualify.
As you can see, it’s more important than ever to work with a skilled lender who can help you and your clients successfully navigate the dangerous terrain of the 2018 mortgage industry.
Please contact me for further information on any of these topics!
Source: CMPS Institute