Just when some lenders and real estate agents are saying underwriting is getting better, six Federal agencies are working to get tougher, stricter requirements for becoming a home owner passed into law. Here are three things they want:
1) Bigger down payment. They want you to make 30% down payment to get the best interest rate and best terms. Ouch! How many first-time home buyers have that kind of cash? This would force tens of thousands of borrowers to take a higher rate, even if they have great credit.
2) Stricter credit requirements. Even with the sub-prime loans far in the rear view mirror, they want even higher standards for credit. This will decrease home sales and home ownership, which is counter-productive to growing our economy.
3) Ban combo loans. They want to ban getting a second mortgage in combination with a first mortgage to avoid paying the monthly private mortgage insurance (PMI). So the strategy of putting 10% down, taking an 80% first mortgage with a 10% second mortgage to save money would become illegal. I have to ask, why are they trying to force everyone who doesn’t have 20% down into paying PMI?
The six agencies asking for this are the following:
1) The Federal Reserve
2) The Federal Deposit Insurance Corp.
3) The Federal Housing Finance Agency
4) The Dept. of Housing and Urban Development
5) The Office of the Comptroller of the Currency
6) The Securities and Exchange Commission
Who Does NOT Want Stricter Home Ownership Requirements:
1) The National Association of Realtors
2) The Mortgage Brokers Association
4) Mortgage Bankers Association
5) Private U.S. citizens
David H. Stevens, CEO of the Mortgage Bankers Association and a member of the coalition opposing the plan says, “We plan to be very clear and very vocal” in fighting this. I say, “You go, Mr. Stevens, and go strong!”
If you don’t want to see this 505-page proposal become law, please make your voice heard by contacting your state representation and saying you are against “QRM-Plus.” And please make others aware of this via Twitter, Facebook, email, and other means, because home ownership affects us all.
“I was just pre-approved for my loan, and although I was assured that I would receive a GFE, when I got my paperwork, I don’t have one. Just the lender’s own loan summary form. Two managers told me they don’t give out GFEs until a rate is locked. Isn’t this against the law? This isn’t the only lender that has told me that they cannot provide a GFE without a rate lock,” wrote a savvy but frustrated lady who’s read my books.
Since a lot of folks are hitting up against this brick wall, I thought it best to answer the question for everyone at the same time.
The short answer is yes, it sounds like they are in violation of the law. I’ll explain.
Effective January 1, 2010, a Good Faith Estimate is required to be issued no later than three business days after the loan officer has received all of the following:
- borrower’s full names
- monthly income
- social security numbers to obtain a credit report
- property address
- estimated value of the property
- loan amount
- any other information deemed necessary by the loan originator to complete an application
Receipt of the above items are how Federal banking law (HUD) defines a loan application.
From HUD’s Real Estate Settlement Procedures Act (RSPA) FAQ 23:
An application includes information the loan originator requires the borrower to submit in anticipation of a credit decision. If a loan originator issues a GFE, the loan originator is presumed to have received all six pieces of information.
So we see that a loan officer can issue a Good Faith Estimate without the rate being locked; and in fact, is required to do so. A rate lock is not borrower information required for a credit decision, so there’s no loophole there.
What’s more, a loan officer must not require your signature before providing the Good Faith Estimate, because that might inhibit you from shopping, which you are fully entitled to. Here’s the quote fro the law.
HUD’s RESPA FAQ 31:
…a loan originator may not require a borrower to sign consents to verify employment, income or deposits as a condition of issuing a GFE as such a requirement may inhibit borrowers from shopping for the best loan by leading borrowers to believe that they are committed to obtaining a loan from that loan originator.
THE BOTTOM LINE
If you have provided all the information stated above to complete an application, your lender must either issue a Good Faith Estimate within three business days or deny your application. If they do not, they are violating RESPA. I suggest you refer them to this blog post with a friendly reminder that they probably don’t want to be reported to HUD (U.S. Dept. of Housing and Urban Development), the legal watchdog that is happy–if not eager–to “follow up” on lenders who violate the law.
ONE LAST COMMENT
Personally, I find the Loan Summary/Cost Estimate Worksheet/Initial Fees Worksheet (whatever your lender wants to call it) to be more revealing and more helpful than the new 3-page GFE that the Feds designed, because they show the breakdown of fees better and include more information (such as total monthly payment and cash to close) than the GFE does.
As always, your comments are welcome.
A sweet little lady who’s managed to live to the age of 91 deserves respect. I don’t think there’s any argument there. So why is our government agency, HUD (U.S. Dept. of Housing and Urban Development) muscling Jeanette Ogle out of her home — when she owns it free-and-clear?
Great question, especially since on their “About” page, HUD claims one of their goals is to protect consumers. Just who do they think they’re protecting by tossing a nonagenarian out into the streets? This is one story that really makes my blood boil, and I’m glad Kenneth R. Harney exposed it in his syndicated column “Nation’s Housing.”
In 2007, Mr. and Mrs. Ogle refinanced their home into a reverse mortgage. A reverse mortgage is a program for senior citizens wherein they can collect cash from the equity of their home. The intent is to help old people who need extra income to live comfortably. Rather than die equity rich and live in poverty, they can receive a monthly check taken from their home equity. And why not? They put the money into the home, so why shouldn’t they be able to take some out? For seniors who need supplemental income, the program makes sense.
However, when the Ogles took their reverse mortgage, the Weasel who called himself a loan officer had only Mr. Ogle sign for the mortgage. At the time, Mrs. Ogle did not understand what was happening. She sat along with her husband and signed all the paperwork she was given to sign. She didn’t understand she was signing an acknowledgement that only her husband was on the loan. No doubt, her husband didn’t understand that either. Only the deceptive loan officer, underwriter, and possibly the signer and funder–all the people inside the business–understood.
In 2010, Mr. Ogle passed away, leaving his wife a widow. Now that the only person on the mortgage has deceased, the loan servicer, Reverse Mortgage Solutions of Spring, Texas, has initiated a foreclosure action. Once the 91-year old is booted out, the house ownership goes to the big government agency, HUD. Like HUD needs another property, right?
HUD has “no comment.” Cowards!
Handily, HUD has on their website an online form where people can send in a complaint about someone who violates housing discrimination laws. I’d love to see HUD flooded with protests on behalf of Mrs. Ogle. If enough people come to her defense, maybe the public can muscle HUD into backing off of their intention to strong-arm a little lady out of the home she and her husband paid for long ago.
Please feel free to pass this on to others in behalf of Mrs. Ogle via Twitter, Facebook, email, or any other way.