I’ve often wondered if the movie Changing Places with Eddie Murphy had a grain of truth to it? In the movie 2 guys (bankers) sit around a club room, smoking cigars and making bets on other people’s lives. They decide to see if they can up end a complete stranger’s world.
These guys might be in control of the mortgage business and real estate economy today. Because if you were trying to screw things up, creating new rules like HVCC and the RESPA revisions couldn’t come at a worse time or with worse consequences. Honestly, my staff and I have attended at least 60 hours of ‘retraining’ to understand some of the new rules, and we are all more confused than ever.
Every banker I know is scared of the changes, and consequences of breaking the rules. The penalties aren’t even clear cut. No one likes change, and new regulation is typically met with resistance and whining, but truly, we are screwing up the economy more with these new rules. Soon lenders will stop issuing pre-approvals, now that is yet another way to slow down much needed real estate sales.
This from: American Banker
The new mortgage disclosure rule is upending the first step in the process of lending to homebuyers.
Before shopping for a property, a prospective buyer typically gets a preapproval letter from a lender indicating how big a loan the person qualifies for. Real estate agents often ask for these letters so they can make sure the customer can afford the property before showing it.
Before writing the letters, lenders like to see proof of income, such as a pay stub or tax return. But under the Real Estate Settlement Procedures Act rule that took effect Jan. 1, lenders may not require such documents before giving the borrower a good-faith estimate of closing costs.
Since lenders are now being held to those estimates, they want to hold off on issuing them as long as possible. So some lenders are reconsidering or backing away from preapprovals. Without them lenders could end up wasting time on loan applications that fall out.
“If you don’t have preapproval letters, then Realtors are going to have to show people houses whether they can afford them or not,” said David Dickinson, president of Bankers Compliance Consulting Inc. in Central City, Neb.
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