Daniel Poulos

Well the new RESPA guidelines have taken effect in the name of consumer protection. Unfortunately, lenders aren't yet sure of how to comply so, to err on the side of caution they are putting originator's through the wringer to get any loans closed. If the people who passed these new laws really understood the end effect they would make it illegal for them to serve as lawmakers.

Here's the real kick in the teeth. I understand that the general public is no match for those who would use every opportunity to prey on them and that the government must play a protective role. While no one was enforcing the rules already in place and due diligence and quality control took a backseat to misrepresentation and greed, unscrupulous mortgage originators and lenders got rich. Now those opportunistic predators are gone, the lenders remain supported by our tax dollars and who is left to suffer the wrath of overzealous lawmakers? That's right, the local mortgage companies that managed to weather the storm and continue to operate based on the reputations they spent years building as well as qualified families trying to buy new homes.

So now regulators come up with a new 4-page Good Faith Estimate of Closing Costs with many zero tolerance line items. It is strewn with mandated time lines that insure that mortgage lending cannot be done in a timely manner. To their credit the forms contain more plain English, but how many borrowers are going to take the time to read the new 68 page "Shopping for Your Home Loan - HUD's Settlement Cost Booklet". Booklet??? Are you kidding me?

Responsible mortgage brokers who have always clearly explained all options and disclosed all charges are used to having the borrower acknowledge that they understand the disclosures and attest to it with their signature. Regulators have decided that they are better at getting the information across with 4 page Good Faith Estimates and 68 page "booklets". But, get ready for this; the new disclosures don't have to be signed by the borrowers!

This is all to similar to the way that the Home Value Code of Conduct passed last year crippled the mortgage approval process, limited borrowers options and caused consumers to have to pay for multiple needless appraisals, but don't get me started on that again...

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Now that the banks have sucked the money out of our economy and then our government they are now hell bent on holding on to it. It's no secret in the mortgage business that lenders are doing everything they can NOT to lend.

I'm not talking about making risky loans. I'm talking about preventing qualified, responsible people from buying a home. Even when loan applications meet every federal lending guideline the wholesale lenders apply restrictive "credit overlays" to deny mortgage loan applications. Furthermore, it appears that experienced underwriting specialists have been replaced with less costly processors who have no concept of analyzing risk. The cost cutting has also left lenders understaffed and inefficient.

Another tool conspicuously disguised as consumer protection is the new Home Value Code of Conduct. By prohibiting loan originators from ordering appraisals from qualified and licensed local appraisers the banks have found a way to undervalue properties using Appraisal Management Companies (AMC) in which their share ownership. Not only do consumers get overcharged for each appraisal, they also get charged for multiple appraisals whenever the application has to be transferred to another lender even when the same AMC does the additional appraisals. This is the biggest scam ever perpetuated on consumer borrowing!

As if that wasn't enough here's another assault on local mortgage companies and consumers, once again, in the name of consumer protection. Wholesale lenders have capped fees to originators (makes sense) BUT the maximum fees include all the lenders junk fees and the rules do not apply to lenders who are permitted by law not to disclose what they are earning on a loan. In other words, if you can conceal your fees from the borrower the maximum fee limits do not apply!

The bottom line is that no one seems to care that at the other end of all these injustices is an American family trying to own a new home. In the big picture it means jobs for the real estate, construction, insurance. home improvement, and all other related businesses. None of this happens if the banks don't do what they are responsible for doing: lending.

Year-after-year the largest lenders in the country push for regulations to stack the deck against hometown mortgage companies. Usually the tactics take the form of sweeping Real Estate Settlement and Procedures Act (RESPA) reforms that are disguised as consumer protection rules but apply only to mortgage brokers while loan originators for lenders remain unchecked and legally unlicensed. The latest cash cow for the Big Banks at the expense of consumers, mortgage brokers and residential property appraisers is the new Home Valuation Code of Conduct (HVCC) policy. How could something that sounds so righteous be so unjust? While it is important to ensure that home appraisals are high quality and accurate, the new policy has prompted the opposite result.

As of May 1, 2009, Fannie Mae and Freddie Mac are no longer purchasing loans from lenders using "appraisal reports completed by an appraiser selected, retained, or compensated in any manner by any third party." Lenders may only accept appraisal reports from a pre-approved list of appraisers or unregulated Appraisal Management Companies (AMC's). In one fell swoop this regulation has put countless independent real estate appraisers out of business. Instead of appraisals being supplied by professionally licensed appraisers operating in local markets values are now determined by unlicensed and inexperienced paper pushers on behalf of AMC's. The AMC's keep up to 40% of the appraisal fee, and guess who gets to have ownership in the Appraisal Management Companies? The Big Banks themselves!

On May 1^st CNBC reported "that it puts good solid appraisers out of business, complicates the loan process for mortgage brokers, and inevitably hurts consumers." The Wall Street Journal on June 9^th proclaimed that "Appraisals are becoming one of the biggest obstacles for Americans trying to sell their homes, refinance their mortgages or tap into home-equity credit lines."

Here are some typical scenarios being reported that have resulted in higher costs, less choices, and difficulty in borrowing:

• If a borrower applies for a mortgage and pays for an appraisal from an AMC they will not only pay considerably more for the appraisal but it is only valid if you get your loan from that lender. If the borrower finds better terms with another lender they are required to purchase another appraisal. Prior to this regulation the mortgage broker would order the appraisal from a local professional and all lenders would utilize that appraisal and retain the right to review the findings.
• Because the property inspectors for the AMC's are receiving only a percentage of the appraisal fee they are reluctant to spend extra time or effort resolving any underwriting inquiries regarding the property value. Compounding the problem is that the substandard appraisals being conducted by the AMC's generate excessive underwriting conditions that are atypical with accurate value determinations conducted by licensed local appraisers. This has unreasonably drawn out the loan process and in many cases borrowers have been denied financing due to inaccurate appraisals.
• Prior to the implementation of the HVCC mortgage brokers would typically speak to an appraiser to prior to a borrower paying for an appraisal to ascertain whether the value might be too low to support a mortgage. Now, it's cash up front then roll the dice.

Ironically, the HVCC arose out of a lawsuit involving one of the nation's largest mortgage lenders accused of conspiring to inflate real estate appraisals. Over-regulation has once again taken the place of enforcement, leaving consumers and small businesses to pick up the tab. Somehow Big Banks have convinced Government that the fox is the best minder of the chicken coop.

There's been much debate about who is being helped by the never ending stream of bailouts. A main point of contention is that the programs for refinancing or modifying mortgage loans seems to only help those who have neglected to pay their mortgage as agreed. Granted, there are people in that situation who have a legitimate plea for help but what about the "responsible" individuals who have done all they can and kept their payments current?

While there are a number of options that provide relief for borrowers who have been unable to stay current with their mortgage obligations there is also a new government assistance program for those with good payment histories. The Home Affordable Refinance introduced last month is designed to offer an opportunity to refinance at today's low rates even if the mortgage balance is more than the current value of the home.

Many homeowner's have found themselves in a position where they put 20% down on their home purchase but due to declining values find themselves without equity in their property. Until the introduction of the Home Affordable Refinance there were no mortgage products available to allow these borrowers to take advantage of the lowest mortgage rates in recent history.

Here are some of the requirements for eligibility:

• The home must be your primary residence
• Your loan must be owned by Fannie Mae or Freddie Mac
• You must have made your last 12 mortgage payments on time
• Your loan balance less than or close to the current value
• You qualify for the new payment

To find out if your loan is owned our securitized by Fannie Mae or Freddie Mac go to www.MyEliteLending.com/HelpMe .

The financing options available for today's home owners are in constant flux. Whether you are in a distressed situation or just want to be sure you are taking advantage of any special opportunities it's best to seek the counsel of a mortgage professional. Many lenders have modification and short sale programs that go above and beyond those sponsored by the government so be sure to speak with someone up to date on recent developments.

For Florida residents, consultations and pre-approvals are conducted for free by Elite Lending. Please call 561-575-5626 to speak to a mortgage specialist and find additional details at www.EliteLending.biz