Notes From The Mortgage Insider

PLEASE READ THIS VERY IMPORTANT INFORMATION ABOUT UPCOMING CHANGES IN THE MORTGAGE INDUSTRY

This week I must interrupt my series of discussions regarding the advantages of FHA mortgages to talk to you about a massive set of new regulations governing mortgage originator compensation that will become effective for all mortgage applications taken on or after April 1, 2011. Rather than bore everyone with a lot of detail or a discussion of whether these changes are good or bad for the consumer, the industry or the economy, I will just offer what I believe is some very practical and timely advice.

The new regulations come to us in the form of amendments to Regulation Z (Truth in Lending) which is the responsibility of the Federal Reserve. However, they have offered very little guidance for implementing them, and what guidance they have given has been contradictory. Nor do they appear to understand the market at the ground level - in fact there are several statements in the official comments to the final rule that are simply wrong. As you might imagine there is a tremendous amount of confusion and conflict with each lender’s interpretation of the regulations; so much so that we are only now (with 15 days left!) receiving the implementing rules and procedures from our wholesale lenders. Three of them have said nothing yet!

My experience tells me that there will be chaos in the mortgage market for at least a few months. So here is my advice.

If any of your clients are planning to refinance for any reason (including divorce) and will likely be able to close within the next 90 days, please tell them to start the application process this week. Many of our lenders are allowing us to submit application packages using pre-April 1 rules even if those loans do not close until after that date, but they must be registered in their systems by March 25. Of course there are several requirements and restrictions that apply, but most of your clients would be very well served to get their application started today.

Please call me if you have any questions and have a great week. Margie