Jay Beckingham

There's a new sheriff in town, actually it's the same old sheriff attempting to flex his/her muscles, if he/she has any.

The US Department of Housing and Urban Development has been working on a new GFE (Good Faith Estimate) for over a year, maybe closer to two and beginning Jan. 1, 2010 we're going to be using this new disclosure, or the new version of the old disclosure.

You can tell it's outdated as it addresses neg am programs, which the market has essentially banned.

You know closing the gate after the horse got out!

The new disclosure is 3 pages long as opposed to the previous one page document.

You know, more is better!

The beauty is that the Total Estimate of Settlement Charges is on the bottom of page one.

Personally I do expect many/most of the buyers to fall asleep somewhere on page 2.

The area currently drawing the most interest is in regards to the disclosure of yeild spread premium.

If you are a bank or an institution with a banking license, that being in most cases a mortgage company funding their own loans, but selling them at some point in time, you will not need to disclose ysp (yield spread premium) on the HUD.

This to me seems to be sneaky!

Where's the openness, the transparency? Apparently that's not necessary for the Banks.

You know how upfront they've been, now don't you!

If you are a Broker, you will pile all origination costs of your own, as well as the actual lender, into the origination fee. That's your point, processing, underwriting, etc. plus the lenders processing, underwriting, etc.

That could be a fairly big number! BUT

Yield Spread Premium to the rescue!

Now it will be shown as a credit to the buyer as opposed as a payment to the broker. The effect on the bottom line, disclosed on page 1;

NONE!

Page 3, which may turn out in practical application to be fairly useless, will disclose particular fees which may not change, those that can change up to 10%, and others which can change at random.

Does anyone really believe that a "good broker" will not be able to deal with this?

Ultimately little has changed. The bottom line should remain the same, so

It's NEW, but I'm not so sure it's IMPROVED!

From the WHO

Meet the new BOSS, same as the old BOSS!

I just got a new "rate sheet supplement" for adjustments and fees. I wish you could see these things. You'd really be surprised that a Loan Officer can accurately quote rates at all. Take a look at this, it's for FHA/VA Loans;

Loan Size

$90,000-$417,000 no adjustment

$60,000-$89,999 subtract .125 from price

$40,000-$59,999 subtract .250 from price

less than $40,000 not accepted

The obvious conclusion; smaller loans cost more money to the consumer.

Credit Scores

Fico 720+ no adjustment

Fico 660-719 subtract .125 from the price

Fico 620-659 subtract .375 from the price

Fico <620 and no score not accepted

The obvious conclusion; lower scores cost more money to the consumer.

Look out for the olde DOUBLE WAMMY!

Small Loans with Low Scores are MUCH more costly to the consumer!

So, John Q. Homebuyer calls and nicely asks, "can you tell me what your rates are today on an FHA purchase." I ask if he has any idea what the mortgage amount will be and does he happen to know what his score is. He answers no.

I can can give him the basic rate today with a verbal disclosure that it is subject to change, depending on the market conditions, his score, and the size of your loan.

When I respond I'm not being nasty, I'm being truthful.

No, I can't quote you a Rate!

Where's David Bowie when you really need him.

For those of you who remember Bowie the answer would be anywhere, probably on a "Space Odyssey!"

If you're invovled in the Real Estate industry today that's what you're doing, going through an "odyssey."

odyssey; long journey with adventures

Bowie's take on changes;

Ch-ch-ch changes,

Are you ready for the next line?

Turn and face the strain.

For the last year, maybe two, they've been firing one major change after another at us!

HVCC, MDIA, RESPA, new TIL's, new GFE, new HUD's, that's just for lenders.

Foreclosures, Short Sales, Strategic Defauts, for Realtors.

I know there's more!

Meet the new mortgage underwriting guidelines. Well I'll tell you that I'd like to, if anyone could clearly tell me what they are. Every lender now has their own version. So I'd explain them to you, if I could.

The way we do business today elicits every type of emotion possible; anger, laughter, smiles, frowns, tears and

"You've got to be kidding me!

Connie Podesta is a Life Coach, Speaker, whatever we call what she does today. I saw her in a short video where she states that she was asked to do a presentation for a company about change. She told them to get everyone together and the semenar would be 3 words.

Change;

Deal with it!

Pretty good advice, and I may add, try to be nice about it,

BUT

Deal with it!

Barring a change or extension of the statue, the tax credit will soon cease to exist, as of the last day of Novemeber. With the implementation of HVCC (Home Valuation Code of Conduct) and MDIA (Mortgage Disclosure Improvement Act) it has become difficult, but not impossible to close transactions involving financing in 30 days or less.

Therefore;

Buyers hoping to receive the credit need to be under contract now! or certainly no later than the end of this month to have any realistic hope of receiving this benefit.

Do you think that there will be a last minute rush? Well that's certainly possible. That could slow the process further.

Please share this with the buyers that are currently looking for properties, and hoping to receive the credit.

You've been warned!

Why? Why? Why? are there no uniform standards for pre-approval letters?

Let's start with do we all agree and/or understand what it is, the old preapproval letter that is. If I have this right, a buyer and their agent are trying to represent to a seller and their agent that the buyer should be able to acquire the mortgage that is necessary for them to purchase the property that they are submitting an offer on.

Preapproval; pre means before, therefore it would follow that preapproval means before the approval. Let's not lose sight of that!

What documentation is needed, or what documentation does the loan officer, the usual grantor of the preapproval letter, have in his/her possession, to issue this letter?

When the buyers Realtor receives the preapproval letter do they know the answer to the above question, or do they inquire about this? I cannot remember any Realtor asking me what I had for documentation, ie: what I based the letter on.

Credit;

If the lender doesn't have a tri-merged credit report in their possession, shred the letter. Approvals are based on middle scores or lower middle scores in the case of joint applicants. Only a tri-merged report will give you 3 scores. A single or double in file doesn't do this and in my opinion has little to no value. It certainly wouldn't justify spending Sunday afternoon showing the buyer 5 properties, just one man's opinion.

What is the middle score? Do you ask? It not only effects approvals, but also pricing in today's world.

Income;

To fill out an application I'm asking the applicant for the last two years of tax returns, all schedules, the last two years of w2's, and 30 days of recent paystubs, with year to date income. Wouldn't you think a requirement for a preapproval should be at least a w2 from last year and recent paystub with year to date income? I mean we've got fax machines, some people still use those, don't they. We've got scanners and email. How hard is it to get this info. Not hard at all.

The self employed need the last 2 years of tax returns (all schedules), period. There's just no other way. That is still actually a problem, in that we are now into October, and will need some sort of year to date profit and loss.

Assets;

Even cash deals require a bank/asset statement showing sufficient funds to close to submit an offer. Why shouldn't a buyer acquiring a mortgage be required to provide the same documentation.

Okay, if I give you a preapproval letter based on the documentation stated above, you may actually have something there. Certainly more than what you've gotten in the past.

Realtors; insist on it! Require preapproval letters with some strength.

Require that every preapproval letter, from every loan officer, has at least the minimum documentation, or send it back.

So why do we not have to meet any uniform standards for preapproval letters.

Simple.

It's not required!