RESPA Reform Changes...New GFE and HUD-1

Are you ready for the changes that the Federal Government have for us in the mortgage industry under RESPA reform effective January 1, 2010? The new version of the Good Faith Estimate or GFE as we speak in the mortgage business (Martian Language), and the HUD-1 HUD 1 settlement statement or 2010 is what I'm speaking more specifically about.
If you are in or have originated your loan before January 1st, you can continue to close the loan after January 1st under the old GFE/Good Faith Estimate, but the title company will close it on the new HUD-1.
What if you are using two loans to buy or refinance your home...like a piggy back and a first for example? You will issue a GFE for both loans and the title company will have two HUD-1's as well. No biggy there.
The Loan Officer AND the borrower will likely benefit from this if used properly. The design of the change is to empower the borrower a little more by "force", to be more accountable in their process of shopping, and in the same, hold the Lender/Loan Officer accountable for their GFE quote in the beginning. In my opinion, the change is a positive for the lender, but that is because I have never bait and switched or mislead intentionally. In the past, I have had a hard time getting through to borrowers that were a little suspect in the entire shopping process as a whole because of the reputation that comes with mortgage. Therefore, my explanation of how to shop, when they were doing it all wrong, was in one ear and out the other. NOW, the honest loan officers in the industry can relax and let the system force the borrower to shop properly.

The lenders and loan officers that have built their business on smoke and mirrors sales tactics with the GFE's and survived on selling rather than consulting will feel haunted now. Here is why. The GFE, the official one governed by RESPA, is not allowed to be issued unless there is a property...this is good because the uneducated shopper (speaking of buyers and not refinance prospects here) would many times spin their wheels shopping lenders before they ever found a home and then months later when they found the home, they would use which ever company they found the months before. That makes no sense, because a lot can change in a week, must less a month or more down the road. Now, when there is a property and a borrower asks for a Good Faith Estimate, that lender is held accountable at closing by the "system" in the new law. The final documents at closing will put the numbers from the GFE side by side with the final numbers on the HUD-1. If these numbers do not match up, or stay within variance by law, the lender is held accountable for the difference. You see where the dishonest loan officer here will not like the new style? I like it, and many of the loan officers in this industry I am friends with like it because now we don't have to worry about "frisbying" out our GFE wondering if some dishonest sales type is our competition where we'll lose a prospect to a lesser deal and lesser loan officer.
Lets get clear on something. There are circumstances in a transaction process that would require rates or fees to change midway through, and the new laws have made room for those and defined the circumstances that will allow a lender to change the settlement variables from the original GFE. Just make sure that you the borrower, or you the loan officer have your client sign the "Change of Circumstance Affidavit" at least 3 days before you want to close the loan...that is part of the new law. If the APR or fees change from the originally disclosed Truth In Lending or Good Faith Estimate (no called the 2010), you will need to redisclose and sign the GFE and Truth In Lending 3 days before close.

Mortgage Rates as the Economy Recovers

Moving.com continues to do an excellent job of telling the public about the daily progress of our economy and how it relates to mortgage rates...just in case the layman wanted to keep an eye on the economy in publicity that can be read and understood by anyone.
Today, bonds started out in negative fashion as the morning report in retail level sales came out not just good, but better than research would have expected. That is a good sign of recovery in our economic times...as I always say, "what's good for our economy, many times is not good for low mortgage rates". In the end for today in comparison to yesterday, rates came out a tad higher...by .125% in discount point (for the layman. That "ain't" much).

This retail level establishments report is announced by The Commerce Department. This is an important report, in case you wanted to take mental note for long term memory, as apposed to trying to add the huge number of reports that we see from day to day in the Stock Market that don't necessarily have a huge influence like this one. The retail level establishments report is important as it makes up two thirds of the U.S. economy.

Furthermore, this blog is piggy backing the recent blog post I made in the Frisco Economic Forecast a couple weeks back, in regards specifically to what rates may do in the coming 6-8 months...if you haven't read it, go read it. Remember, sitting here today with the 30 year fixed FHA and Conventional rates at 4.875%, a 7% to 7.875% rate on that price range you are holding off on today will bring a monthly payment well more than $100 a month higher at the expected higher rates than the ones today. That means you will probably settle for a lesser house in 6-8 months than you would now.

Frisco Home Sales and Average Prices...Expectations for Future Foreclosures

Home Sales up
Given what our market has been through, lets think with our common sense and jump to some apparent obvious conclusions about what we would expect. With the enormous number of foreclosures, and short sales that have a negative affect on house prices, and the fact that so many buyers were eliminated from the buying game when mortgage qualification guidelines tightened, we know why and where the drop in home prices on average came from. Right? That all seems like commons sense. Now that value of all homes in America just about are less than they were a year or more ago, anyone buying those homes today would be buying them at a lower amount then before...more common sense. So when we here reports that the number of homes sold in April or May this year is a little from last year, but the average price per home is less, we shouldn't be pessimistic and say, "who cares that the number of homes sold increased cause prices are down". That is not a fair statement because the homes sold today have to be less on average and the number of homes sold increasing is the best first sign we can expect. Right?
CNN reported, "Existing home sales rose 2.9% while the median sales price fell 15.4% to $170,200".

Average Sale price down
Lets not worry so much about the average sale price of homes just yet. America saw too many job losses and pay cuts for us to have a bustling appreciation on sales prices just yet. Let Americans get some placebo going in the right direction and as we start making an extra dollar, we'll get right back on into our good ole American ways...spend and leverage "babe"! Once that happens, then we can focus on home prices. Keep this note on your fridge though, over correction is in the forecast for 2010 and mortgage rates are expected to be in the high 7% range at best...they might have started that assent last week by the way the volatile market is playing out. We had two interest rate "worsenings" just today.

The foreclosure numbers haven't stopped, and there are more to be expected.
Forbes reported that in March the unemployment rate went to 8.5%, the highest in 25 years. Economic forecasters figure that we'll see a continued problem in foreclosures at least through this summer and fall.