Obama And The Mortgage Industry

Last night I watched a few minutes of the President's State of The Union Address. To be honest, I have never watched a State of the Union speech before and for the most part I am not interested in politics...but.. What I found interesting is that in the few minutes that I watched President Obama talk he was addressing the big changes that have happened in the mortgage industry... My industry.... This change is the biggest change in the mortgage lending business in 30 years and everyone is going crazy.... As one lender put it to me - leave it to the government to "simplify" a document - by making it 3 pages rather than the 1 page it was..

What President Obama stated in his Union Address is that buyers needs to know the fees that they are paying.... I completely agree with that statement but..... the form could be better.... the impact on lenders and brokers could be less drastic.... This is what is happening today with the NEW and Improved HUD - Department of Housing and Urban Development and NEW and Improved RESPA- Real Estate Settlement Procedure Act.

As of January 1st of this year - there is a new Good Faith Estimate - this is a form that outlines the fees you may pay to obtain a new mortgage loan... Before this year the form was 1 page - it had a list of services and the prices that are associated with a particular service... An ethical loan officer (all mine are) would fill out the form as close to the costs as possible - in most instances - my officer would quote high... and at the end of the day - if the fees were lower my loan officer would be a hero..

Now the form is a little confusing - after taking three classes to understand it - I got it but... it really isn't fair to the broker.... Basically what happens is this: If the broker (me) under quotes a fee - whether it be my fee... the lender's fee... escrow or title's fee... or a fee that was added by the lender after the fact..... Not only that - if the loan is a purchase - we must disclose some of the seller's cost - which in all fairness has NOTHING TO DO with the borrower's loan... This is new and if we mess up - there is NO TOLERANCE and the broker eats the difference...

Webster's Definition of Estimate is:

Main Entry: ¹es·ti·mate

Pronunciation: \ˈes-tə-ˌmāt\

Function: transitive verb

Inflected Form(s): es·ti·mat·ed; es·ti·mat·ing

Etymology: Latin aestimatus, past participle of aestimare to value, estimate

Date: circa 1532

1 archaic a : esteem b : appraise
2 a : to judge tentatively or approximately the value, worth, or significance of b : to determine roughly the size, extent, or nature of c : to produce a statement of the approximate cost of

Estimate is just that an estimate not an exact fee - with interest rates and the cost of a particular rate changing daily... at times by the minute - it is very difficult to quote an exact rate. The way lenders and brokers work is going to be much different... Many of my officers are afraid to quote due to the fact - they may be wrong and end up paying to close a loan rather than make an income... My submissions to the lender is lower than it has been in years - why? because my loan officers are afraid to mess up...

The government needs to realize that not all - lenders and brokers are bad people... I have been in this business for 23 years and I have always maintained high ethical standards... and so have my loan officers... I believe instead of penalizing the entire industry - penalize the lenders who have proven themselves to be abusers of the system... It would be much easier to have a monitoring system for fees on the government side vs having everybody adhere to strict and unforgiving guidelines....

It's a New World.... It's a New Day..... It's a New Government....