Industry Changes 060209 Notes Page


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  • HVCC is Today and Now HERA is right around the corner HOEPA is in the Fall AND RESPA Early 2010
  • Say this before going through slide: “Before we go into detail – Why did these changes come about?”
  • Bullet 2 – Does not apply to government loans Bullet 3 – Anyone whose compensation is based on loan production. -Our liasion between sales and Rels is our Operations Managers Bullet 4 – What this means is that the borrower will be required to certify that they have received a copy of the appraisal at least 3 business days prior to closing or waive their right to this requirement at closing. Bullet 5 – What this means is any closing cost addenda/any addenda must be given to the appraiser upfront and must b in final valuation within 3 days before closing. Completion of the appraisal is not enough, so for example, if any changes go to underwriting or any changes at all, that can restart the clock. Let’s talk about how our appraisal process works (click to next slide)
  • *Note: FNMA/FHLMC will be closely monitoring this process much like the right of recession on a refinance
  • Bullet 2 – This means no appraisal can be ordered Note: In a face to face application, the fees can be collected at time of application because disclosures are given at that time Smart TIL - (mailed day one – 4 th business day after mailing starts the 3-business day “wait” for closing) APR – Annual Percentage Rate is a term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan. This is not the same thing as the interest rate, which is used to determine the monthly principal and interest payment. The APR reflects the cost of the mortgage loan as a yearly rate. It will be higher than the interest rate stated on the note because it includes (in addition to the interest rate) loan discount points, fees, and mortgage insurance.
  • As a response to subprime crises HOEPA was passed Currently, there are no sub-prime loans but the rules now exist and were put into place to regulate these types of loans but we will probably not see sub-prime loans offered again.
  • Effective date is a moving target
  • In a perfect world where everyone does everything perfectly, this calendar shows the quickest we could close a loan
  • There is this mystic of the closing date having to be a particular day
  • Industry Changes 060209 Notes Page

    1. 1. Preparing for Industry Change Prosperity Mortgage and Long and Foster June, 2009 <Insert JV logo>
    2. 2. Industry Changes : Four New Federal Requirements R egulations will affect every mortgage originator in the nation Housing & Economic Recovery Act July 30, 2009, implementation of new timelines for delivery to customer of initial disclosures and TIL Home Ownership and Equity Protection Act Oct. 1, 2009, implementation of higher-priced mortgage regulation Home Value Code of Conduct May 1, 2009, implementation of new appraisal-delivery rules: customer must receive at least 3 days before closing RESPA Tentative implementation of January 2010; legislation still in flux All Lenders Must Comply, Including Brokers I. HVCC II. HERA III. HOEPA IV. RESPA July 30, 2009, implementation of required licensing for all originators with fingerprinting, background check Reduces/eliminates rush closings or last-minute rescues; severely limits closing-table changes to fees, loan amounts, etc. New category, disclosures and processes Changes to sales marketing materials Q2 2009 implementation of new advertising disclosures Appraisal questions may delay closings; HVCC requirements must be met for sale to Fannie/Freddie Revised GFE and HUD-1; ‘Required Use’ is dead 1 Today Around the Corner In the Fall Early 2010
    3. 3. What is Going On? Why All These New Requirements? <ul><li>Federal government’s response to mortgage crisis. </li></ul><ul><li>Mortgage Industry controls being enacted as a response to those lenders who took unacceptable risks. </li></ul><ul><li>The Legislative response was to create consistent business practices among all lenders. </li></ul>
    4. 4. <ul><li>Home Value Code of Conduct </li></ul><ul><li>(HVCC) </li></ul>
    5. 5. Home Value Code of Conduct (HVCC) <ul><li>Effective: TODAY – Date live: May 1, 2009. </li></ul><ul><li>Applies to Fannie Mae (FNMA) and Freddie Mac (FHLMC) deals </li></ul><ul><li>Establishes a firewall between lender and appraisers </li></ul><ul><ul><li>Now, if a lenders compensation is based on loan production, he/she cannot communicate with the appraiser or appraisal management company. </li></ul></ul><ul><ul><li>Establishes appraiser independence from undue influence—Loan Officer’s can no longer communicate directly with the appraiser. </li></ul></ul><ul><li>Requires lenders to provide loan borrowers with a copy of their appraisal/property valuation 3 days before closing </li></ul><ul><li>Appraisal/property valuation includes any addenda (including any changes due to a home inspection or walk through seller credits) used in value determination, but does not include final inspections </li></ul>
    6. 6. HVCC con’t -- Appraisal Process <ul><li>Loan Officer orders appraisal once the ratified contract is received </li></ul><ul><li>Target date expected is 3 business days prior to appraisal/finance contingency date expiration </li></ul><ul><li>The appraisal goes to our wholly dedicated appraisal review department where the appraisal is reviewed for accuracy and is then sent to underwriting </li></ul><ul><li>Often, the underwriter will have additional requirements of the appraiser </li></ul><ul><ul><li>This could add a day or two to process and then must be re-reviewed by credit underwriter (is the sales price the same? Are there any other changes? Changes to contract?) </li></ul></ul><ul><ul><li>Will affect turnaround times which in turn means delayed closings and this is why appraisals have been such a sticking point and this new legislation only amplifies this. </li></ul></ul>
    7. 7. Home Value Code of Conduct (cont’) <ul><li>Lender Impacts </li></ul><ul><li>NEW: FIRST, lender must disclose to borrower at time of application </li></ul><ul><li>NEW: Second, At closing, borrowers must sign Appraisal Acknowledgement Form indicating they’ve received/reviewed appraisal or waived* right to 3-day appraisal review period. OR, customer has right to reschedule closing </li></ul><ul><li>NEW: Effective May 1, 2009, Saturday will be counted as a business day </li></ul><ul><li>Real Estate Impacts </li></ul><ul><li>Delayed closings </li></ul><ul><li>Limited last minute closings </li></ul><ul><li>Limited last minute “rescues” </li></ul><ul><li>Last minute changes will result in closing delays </li></ul>
    8. 8. <ul><li>Housing & Economic </li></ul><ul><li>Recovery Act </li></ul><ul><li>(HERA) </li></ul>
    9. 9. More About HERA/HOEPA (Disclosures) <ul><li>Effective Date: July 30, 2009 (Around the Corner) </li></ul><ul><li>Disclosure Changes </li></ul><ul><ul><li>Lender must provide initial disclosures (Truth in Lending [TIL] and Good Faith Estimate [GFE]) to customers at least 8 business days before closing </li></ul></ul><ul><ul><li>Cannot collect any fees until initial disclosures received (received = 3 business days after mailing/face to face = same day) </li></ul></ul><ul><ul><li>As part of the new legislation/regulation, lenders are required to provide what is called a “Smart TIL, ” which is the final binding TIL statement. It must be delivered to customers at least 4 business days before closing. </li></ul></ul><ul><ul><li>If APR changes + 1/8th%, loan cannot close until 3 business days (the “wait”) after new “Smart TIL” is provided to customer </li></ul></ul>Housing & Economic Recovery Act (HERA) Impacts: Limited rush closings, last-minute rescues, closing table changes 8
    10. 10. More on HERA (con't) <ul><li>AS AN FYI-This doesn’t affect you but… </li></ul><ul><li>Effective date: July 30, 2009 </li></ul><ul><li>National Licensing/Registration Requirements </li></ul><ul><ul><li>Affects all loan originators/brokers </li></ul></ul><ul><ul><li>All Loan Officers must be registered with Nationwide Mortgage Licensing System </li></ul></ul><ul><ul><li>All Loan Officers must go through a background check </li></ul></ul><ul><ul><li>All Loan Officers will be required to be fingerprinted </li></ul></ul>Impact: Possible termination of loan originators who don’t pass FBI background check 9
    11. 11. <ul><li>Home Ownership and Equity Protection Act </li></ul><ul><li>(HOEPA) </li></ul>
    12. 12. Home Ownership and Equity Protection Act ( HOEPA ) <ul><li>Not Effective until October 1, 2009 (In the Fall) but we wanted to brief you… </li></ul><ul><li>Applies to all closed end principal dwellings (no home equity loans) </li></ul><ul><li>There is a new test to determine if the transaction is considered a high cost loan </li></ul><ul><li>If considered a high cost loan: </li></ul><ul><ul><li>Limitations on prepayment fees </li></ul></ul><ul><ul><li>Additional disclosures </li></ul></ul><ul><ul><li>Income verification a must to show borrowers ability to repay loan </li></ul></ul><ul><ul><li>Escrows for insurance and taxes mandatory </li></ul></ul>Impact: New category with different disclosures and processes 11
    13. 13. <ul><li>Real Estate Settlement Procedures Act </li></ul><ul><li>(RESPA) </li></ul>
    14. 14. <ul><li>Another FYI </li></ul><ul><li>Tentative Effective Date: January 2010 (Early 2010) </li></ul><ul><li>Fees need to be within stated tolerances – or lender incurs the loss – as part of ‘binding’ Good Faith Estimate </li></ul><ul><li>Revised Good Faith Estimate and HUD I will be in a similar like format </li></ul>Real Estate Settlement Procedures Act (RESPA) Note: RESPA implementation in flux with current legislative activity 13
    15. 15. Calendar If the application is taken in person (instead of a phone application in the example below), then we may be ready to close up to 4 business days sooner because the initial disclosures are issued and the upfront fees can be collected at application.
    16. 16. Overall Impacts <ul><li>Eliminates ability to do rush closings or last-minute rescues </li></ul><ul><li>Severely limits closing-table changes to fees, loan amounts, etc. </li></ul><ul><li>Possible termination of loan originators who don’t pass FBI background check </li></ul><ul><li>Additional disclosures, requirements for customers choosing higher-priced mortgages </li></ul><ul><li>Binding GFE and HUD-1 </li></ul>
    17. 17. Setting Expectations & Changing Mindsets <ul><li>Lots going on in industry </li></ul><ul><li>Lots of changes outside our control </li></ul><ul><li>Let’s set up for success not failure </li></ul><ul><ul><li>Need to build in more days to close loans (at least a minimum of 30 days as a guide—see calendar) </li></ul></ul><ul><ul><li>Need to create the proper expectations with buyers and sellers, i.e. flexibility on settlement dates </li></ul></ul><ul><ul><li>This means: </li></ul></ul><ul><ul><ul><li>No movers sitting outside </li></ul></ul></ul>
    18. 18. <ul><li>These changes are regulatory – all lenders have to comply </li></ul><ul><li>We need to work together to educate each other – and customers – to avoid missing closing dates </li></ul><ul><li>Let’s decide how to re-set expectations within the team and among customers for success in the ‘new reality’ </li></ul><ul><li>Let’s turn these changes into successes! </li></ul>Bottom Line: Let’s Work Together Doing Nothing Is NOT an Option! 17