Category Archives: Legislation

New TRID Updates and How They Affect You

WHY THE CHANGE?

The new TILA-RESPA Integrated Disclosure rule (TRID) rules and forms took effect October 3, 2015. You may have heard of the new rules, however, I’ve taken some time to clarify a few questions and ways that the new regulations will affect both buyer and lender. This new rule is meant to simplify and clarify. The TRID updates are an attempt to improve and correct possible flaws with the current regulations. Starkey Mortgage can assist with this process which will make for a smooth buying process.

THE NEW RULES

To begin with, there are two new forms that are much more user-friendly than their predecessors. They are the Loan Estimate and Closing Disclosure forms, which are replacing four different forms from two government agencies. The form layouts are easier to understand, and you might find that they simply look better. They also make comparison shopping loans easier on the borrower.

Another change is the timing of the closing and the delivery date requirements. Borrowers will now be able to review the Closing Disclosure for at least three days prior to closing. In addition, the title company will need to send their fees to the lender well enough in advance of closing to allow the lender to meet the new delivery date requirements. The seller will receive this Closing Disclosure at or before closing. This prevents the deal from changing at the last minute, while giving buyers more time to review the paperwork before reaching the settlement table.

HOW IT AFFECTS LENDERS

Lenders will likely have a lengthier process to undergo than in prior years. They are now responsible for the Closing Disclosure instead of the title company. Internally, they will need to allow for more time in order to have the required forms submitted on deadline. While the new regulations lay more responsibilities on the lender, they benefit all involved in the long run.

HOW IT AFFECTS YOU

The National Association of Realtors is also recommending that Realtors add 15 days to the normal closing time frame to account for these changes. As a buyer, your quoted closing time may increase, but you will likely benefit from this extra time.

Any inspections or repairs will need to be handled earlier in the process than before the new updates. The goal here is to reduce any last-minute complications. So while the burden is increased on the lender, you the buyer can greatly benefit from the new regulations.

HOW I CAN HELP

Our team of professionals can help you navigate the TRID maze and come out a winner on the other side. Though the process has changed, our concierge customer service has not. Our experts understand the ins and outs of these new rules, and want to help you feel confident in your home purchase. For more FAQs, please visit: http://www.realtor.org/law-and-ethics/faqs-tila/respa-integrated-disclosure-trid-rule.

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Mortgage Solutions using V.A. lending as our guide

V.A. Loans, those guaranteed by the Veterans Administration, work.  That’s the short of it. See the graph of seriously delinquent mortgages by loan type:

Note the blue line for VA loans.  See how those have been the best performing loans in the industry at least since 2005 through the 3rd quarter of 2010?  Guess what?  V.A. loans do not require any down payment whatsoever!  In fact, V.A. loans are a lot like the sub-prime loans of 2004-2007!

You see, V.A. loans do not require a down payment.  V.A. loans do not have a minimum credit score in order to be financed.  V.A. borrowers can have a bankruptcy discharged within the past 2 years.  In fact, sellers can even pay down a veterans debt in order to help the veteran qualify.  These are very flexible loans.   Perhaps the move to require larger down payments and higher credit scores isn’t the answer.  Maybe improving our loan performance has more to do with underwriting practices.  You see, a VA underwrite is different from the others.  Let me explain how I would fix the nation’s lending problems by detailing some of how a VA loan is underwritten.

1) Let’s consider why a person’s credit score is low instead of only looking at the numerical score.  If the story makes sense and/or if reasons for negative credit can be proven to be beyond the borrower’s control, let’s proceed to an approval.

2) Let’s consider how much money the borrower will have to spend after his or her home maintenance, social security, and state and federal taxes are paid.  And then, let’s consider how many people are in the household.  If they have residual income of a certain amount after the above is considered, let’s move forward with an approval.

3) Let’s have all appraisers selected by one single entity just like V.A. appraisers are selected.  Let’s not farm out our appraisals to the lowest bidder.  Let’s not use appraiser’s who are outside of the subject property market area.  And let’s make all appraisals also include an assessment of the property condition.  If the local appraiser being paid a fair wage, selected via a random process, gives a satisfactory condition report and a substantiated opinion of value that supports our purchase price, let’s move forward with an approval.

I have closed hundreds of V.A. loans, and the experience has taught me a lot.  In fact, I consider myself to be somewhat of a V.A. expert, and I’ve always thought V.A. underwriting just made more sense than conventional or FHA underwriting.  I don’t suppose I have all the answers, but when I see data like that in the chart above it makes me think that perhaps we should learn from the data and then make decisions instead of the other way around.

If you, or someone you know needs a V.A. loan, contact me via the link above my picture.  I’d love to put my experience to work for you!

Mortgage Rates to fall further?

Fed to buy hundreds of billions more in bonds

The Federal Reserve is making a bold effort to invigorate the economy by announcing it will buy hundreds of billions more in Treasury bonds.

The Fed says it will buy $600 billion of long-term government bonds by the middle of 2011 to further drive down rates on mortgages and other debt. This will be in addition to an expected $250 billion to $300 billion in purchases over the same period from reinvesting proceeds from its mortgage portfolio.

The idea is for cheaper loans to get people to spend more and stimulate hiring. The Fed says it will review whether adjustments are needed depending on how the economy is performing.

Some worry the Fed action will do little to boost the economy because interest rates are already historically low. Others fear the bond purchases could drive inflation too high over the long term and unleash speculative buying in assets like stocks.

Spending money in this fashion is like building a larger campfire on a cold night by throwing shreds of your clothing into it.  Sure, the fire and your smile grow larger while you begin to feel good about your decision, but eventually all of your clothes are reduced to ashes and the fire dies down.  Spending money we don’t have in order to boost the stock market, drive down unemployment, and jump start the economy is a very dangerous thing.  I believe the long term effect of this decision will be dramatic increases in interest rates over the next couple of years.  From an interest rate and home price perspective, there has never been a better time to buy a home.  If you’re on the fence, it’s time to jump off!

Let me know if I can help you find a home to buy.  Click the “Search the MLS” link to the right to find the home of your dreams, then we’ll go look at whatever piques your interest!  Call me at 850-678-HOME (4663).

May God bless America. We're going to need it!

 

May God bless America, we’re going to need it!  It doesn’t seem there are ever more than 3 months or so before new lending guidelines are implemented.  The latest takes the cake for being the most apropos to where we are as a nation.  Since June 1st, if you lie on your loan application, it’s my fault because I didn’t figure it out.  Nice huh?  How’s that for “Made in America”?
 
 
Today I spoke to a group of awesome Realtors from the Niceville MLS tour about a couple of things that seemed to pique everyone’s interest.  These included a CNN article entitled “Housing Shortgage Coming Soon?” and a brief explanation of the new Loan Quality Initiatives (LQI) implemented by both Fannie Mae and Freddie Mac on June 1.  The new LQI states, in a nutshell, that “the lender is responsible for any and all borrower debt up to and concurrent with the closing.”  You can click the links in order to see the actual documents.
 
 
A couple of points that we didn’t mention about the new LQI include: many lenders may still not be aware of this new guideline, nor how it will impact their loans; and this only applies to loans where the application was completed on or after June 1, 2010 so very little experience has been had with it thus far.  As I’ve said in previous newsletters, as you see increasing responsibility being placed on the originating lender you’re going to see lender fees and/or interest rates come up across the board to offset risk and cover increased costs.
 
 
Perhaps the best piece of advice given to Realtors today was to be very emphatic with their buyers about the importance that they not do anything unusual with their credit during the escrow process.  If you’re considering borrowing money to buy a home, don’t apply for new credit (after the mortgage) anywhere, don’t have your credit report pulled, and don’t allow existing credit account balances to increase dramatically, and keep paying your bills on time!  Finally, be sure to disclose everything up front as lenders will be finding new and innovative ways to scrutinize your financials even more closely now than before.  After all, I don’t want to get in trouble because I didn’t realize you weren’t being entirely honest with me!
 
 
I know many of you have closed on a mortgage loan in the last couple of years.  If you applied for a mortgage these days, you’d be surprised at how many questions are asked, and how much paperwork is needed.  I know you’d prefer it be easy like it used to be, but it isn’t.  That doesn’t mean that qualifying for a loan is too difficult these days, because it isn’t, really!  Meeting all of the lender requests for information may mean you need a vacation afterward, but really it’s not that bad.  Just be honest with us, and understand that times are different now.
 
 
Steve and I are committed to your financial understanding, especially as it relates to all things real estate.  If we can do anything at all to help you please don’t hesitate to ask either of us
 
And by the way, interest rates are again about the lowest they’ve ever been.  Now is the time to lock in a low rate to refinance an existing mortgage, or purchase the home you really want!
 
 
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