Archive for January, 2010
Licensing, New Regulations, HUD, and NMLSR
This post may seem directed at only loan officers and mortgage professionals, but borrowers may at long last see our plight by reading this post. We are here to help you, the borrower. Sure, we make money at what we do. But it is well deserved if you’ve spent even five minutes with any of us. It seems these days that a flood of regulations has taken effect. The mortgage tsunami has hit. But it’s been coming in wave upon wave for nearly a year. I have said many times we do not have an advocate; maybe we have the Mortgage Bankers Association and NRMLA, but is anyone listening? Did HUD listen to our cries? Had we had true and effective representation these stringent rulings would never have passed. Why doesn’t HUD talk to the loan officers who are in the trenches every day or to the senior homeowners who look to their government to help them? We in the industry have been deluged with HUD’s NEW Mortgagee Letters with SO many changes that it feels like a huge tidal wave. I am just weary of all the new things we’ve been hit with due to all the new regs and laws and tolerances and time constraints. Three days this, seven days that! The NEW Good Faith Estimate is a good one. It is longer and much more complicated. I pity the poor borrower! Is it all being done to overwhelm us loan officers? Or to help our borrowers as we have been told? We are supposed to enjoy this business and help seniors. How can it help if borrowers have MORE paperwork to read (and oh how they HATE all the paperwork– ask me how I know!)? And if their closings are delayed how does it help? This business is now RIFE with more paperwork than ever before, and there is MORE and MORE to explain to the poor senior who only wants his money! I feel like I live in old Russia with the Bolshevik’s breathing down my neck and me running from them while I try to survive! We must unite or we are all doomed to more of the same!
Now for today’s blog. I thought I would cover the test, the NMLSR National Component, required by the SAFE Act which went into effect 7/30/2008 (all loan officers must be tested and licensed.) That is if you don’t work for a bank! The National Mortgage Licensing System and Registry (NMLSR) made up by regulators, began implementing testing first for the national test and now state tests for each state you are licensed in. (There are different training companies and testing agencies such as Pearson Vue, Abacus Mortgage Training, Accelerated Training Systems, etc., as well as many others.) Borrowers will be able to go online to check and see who is licensed and who is not. Certain states are behind, such as New York in issuing licenses, and at one point they were six months behind. However, New York State Banking Dept. has issued Pending-Accepted status so those originators are approved to originate loans until New York State Banking issues their licenses. Now, as for the national mortgage test, there was a 40% failure rate on the national test, but it’s a little better — 68% are passing or least that’s the statistic for 12/31/2009. I’ve been in the mortgage industry for eight years, specializing in Reverse Mortgages for six. I love what I do. But never in my career have I seen so many changes in so short a time. We all want to protect our borrowers, but the overwhelmingly stringent changes do nothing but add more paperwork for us and them and more confusion to what some borrowers already view as a “difficult to understand” loan. Sure, to us it’s easy. But when older borrowers see numbers in front of them and more paperwork to be explained, they become bewildered.
Back to the SAFE test. Licensing all mortgage originators is a wonderful idea and should have been done many years ago. But not licensing or testing banks is totally unfair and unconstitutional. MY TEST: I entered the testing room on December 21 to take the national component developed by NMLSR. I had studied very hard for this test, and I mean INTENSE studying; it was grueling to say the least. I pulled down from the web and printed and studied every regulation, every PDF, every glossary about the mortgage industry I could find, and every mortgage website I could study. If you’ve ever done a Reverse Mortgage you know it’s intense and absorbing and tons of work for the loan officer. Just printing up docs is a lot of paper and work. Keeping up with everything that comes our way from HUD and the Feds is grueling.
Pre-licensing education taught us we needed to know certain things, and when I first saw the 500 page mortgage book it looked overwhelming. Let’s face it; as a Reverse Mortgage Specialist, I hadn’t’ done a forward loan in years. However, the regulations still stand. We needed to know these things anyway. Do let me ask you, how many forward loan officers who are as busy as we ARE actually WENT online or anywhere else and studied every single regulation in their their original format as well as changes to those regulations? Very few. Everyone is too busy working with borrowers, going to their homes, answering phones, sending “great to have met you” letters, running credit reports, printing documents, and in this difficult economy, staying alive. Much of the documents are a lot of lawyer talk and one wonders if HUD wants to impress or truly communicate. Most borrowers just can’t handle it. Much of it sounds like: “It’s THIS way when it’s not THAT way.” Sounds like double-think!
To continue, I knew I needed to pass the national test and pass it the first time. Or I would be relegated to taking it again and paying $92 again! The national course I took cost about $350, the license for New York $299, well, you get the picture. Why spend more if you can pass the first time. Passing first time was my goal. I did pass. However, the test was tricky in parts and those who never originated a forward loan will definitely have trouble with this test — IF they pass at all. My advice is to do your OWN homework. Don’t rely only on your training manual, and if you can take pre-tests and pre-education after you take your pre-licensing course, do it. Know RESPA, TILA inside out. Try to think HOW a regulator thinks! Also, listen to your trainer and the company who put out the training classes. Now, maybe like me, you’ll find you won’t be asked ONE SINGLE question about Reverse Mortgages on the national That’s right! ZIP about Reverse Mortgages. Puzzling. Here is a HUGE industry with TV commercials on every single day, and not ONE question on the national mortgage test?? I also wasn’t asked a thing about H4H, Making Home Affordable, Modification Loans, HMDA, HOEPA, DTI for Fannie Mae, DTI for FHA, the Telemarketing Rule, SAFE, NMLS info, the NEW Appraiser Independence for HVCC, Gramm-Leach-Bliley, and so many other things I killed myself studying. (For those non-mortgage people reading this, don’t worry if you don’t know the acronyms. It would take up too much space to write them out!) There were also no straw buyer questions, no air loan questions, and so on. NMLS does have a “range” of questions, so each person who takes the test isn’t asked the same questions. I was asked some questions about LTV, and questions about RESPA, TILA, etc. Can’t recall now what the questions were, but suffice to say for a person who studied as hard as I did, and it was still tough should tell you something. I can only say I wish everyone the best. NMLSR also does NOT round up the percentages. For example, if on a portion of the test you got 81.92%, you will end up with 81%. The pass/fail rate has improved. 68% are passing as of 12/30. I haven’t checked since. We in the mortgage business have been thrown a barrage of rules, regs, and changes almost all at once. We have been hit hard, and many L/O’s are trying to navigate the changes. Many write loans now with fear and trepidation. We have lost a LOT of control as well as our collective voice. Delays for our borrowers will be the end result of these new regulations. Borrower protection is the goal and a noble one. But much of this does NOT help the borrower!
So what is happening here? Big brother is knocking at our door. In fact, he’s already inside. It’s WE that have let him in without protest. Winston Smith in Orwell’s 1984 had a similar experience when he was confronted with a poster on a wall as he entered Victory Mansions:
“On each landing, opposite the lift-shaft, the poster with the enormous face gazed from the wall. It was one of those pictures which are so contrived that the eyes follow you about when you move. BIG BROTHER IS WATCHING YOU, the caption beneath it ran . . .There was one on the house-front immediately opposite. BIG BROTHER IS WATCHING YOU, the caption said, while the dark eyes looked deep into Winston’s own . . . Winston roused himself and sat up straighter. He let out a belch. The gin was rising from his stomach . . His pen had slid voluptuously over the smooth paper, printing in large neat capitals –
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!
DOWN WITH BIG BROTHER!. . . (George Orwell’s 1984 – Part I, Chapter I)
Do I hear an “AMEN!” from anybody??? I rest my case. Until next time!
What’s in a Name? RESPA, SAFE, NMLS– TILA, Who, what?
MDIA, SAFE, NMLS– RESPA, TILA!!
What’s the deal?
There was a time in the not so distant past that I called “the good old days”, when a simpler, less complicated mortgage world existed, and where Good Faith Estimates showing the estimated costs of a mortgage was a simple document. They were easy to explain and typically one page.
At closing a HUD1 settlement form was issued to the borrower which showed final closing costs. Prior to closings, loan officers went over these final costs with their borrower. One day prior to closing exact fees were disclosed from the HUD1 and borrowers knew exact costs rather than find out at the closing table.
Obviously our Federal Government wasn’t happy with the process in light of the mortgage crisis, understandably so, and so the entire industry from top to bottom has been revamped. To prevent fraud and protect borrowers, many changes in the industry have taken place. This is good! Borrowers should never be overwhelmed by high closing costs, costs they never expected. However, did you ever hear of an onslaught of information and rules that weary the mind? Well, this is it! Pity the loan officer who has to disseminate all the constant changes, new rules, new laws, mortgagee letters, new time constraints, new mortgage education, testing, licensing — it makes your head spin. But this is the New World Order of Mortgaging! And it’s all supposed to benefit the end user, the consumer– YOU. And isn’t that what ALL Loan officers want?
Rules that were passed in 2008 took effect July 30, 2009 and onward and have been slowly implemented. While no one doubts the mortgage industry needed more oversight, it’s been difficult to navigate in a wave of regulations coming one on top of another. Transparency and disclosure is the reason for the change, but in light of all the new HUD Mortgagee letters and laws and acts, it has now become overkill for loan officers. And it has been difficult for borrowers whose closings are delayed due to time constraints and special disclosure requirements before you can close.
As of January 1, 2010 a brand NEW Good Faith Estimate has been implemented. Loan officers are NOW permitted to produce only ONE Good Faith Estimate, and that is at time of application. Any changes to the GOOD FAITH are labelled a “QCC-Qualified Changed Circumstance” such as appraised value changes (whether higher or lower) and the new Good Faith must come from the lender themselves to the borrower within THREE days of discovering the QCC. The Good Faith is NOT permitted to be changed by a loan officer. It must come from the lender.
Definition of an Application: We’ve not only got a NEW Good Faith Estimate, but we now have a new DEFINITION of what constitutes an application! Once a loan officer gets name, address, social, income, and other criteria, this is considered an “application”. Loan officers MUST have borrowers complete and sign the actual application and disclosures within three days. Times, they sure are a’ changin’!
RESPA: Real Estate Settlement Procedures Act:Regulation X, which implements RESPA, known as Real Estate Settlement Procedures Act with new changes called the “final rule”, imposes new forms and new tolerance requirements.
HUD published the “final rule” November of 2008 in order to simplify the industry and the consumer’s ability to shop for settlement services. 2008 was a BUSY year for the mortgage industry while the feds were busy fixing the mortgage meltdown.
Additionally, borrowers were always able to shop for certain services such as title insurance, flood insurance, etc. This has not changed. But now they will be provided with a list of title charges so they can compare a title quote from their OWN sources to the loan officer’s quote.
Real Estate Settlement Procedures Act of 1974 was implemented at the time to provide consumers with improved disclosures of settlement costs. It was to encourage consumers to shop for settlement services. Also, RESPA eliminated referral fees and kickbacks. All these things were and ARE good.
SAFE ACT: What is it? Let us look at one of the acts that was passed in 2008, an act I feel was a long time in coming. The SAFE ACT, part of HERA (Housing and Economic Recovery Act of 2008), sets a new standard for mortgage originators as it requires licensing, testing, and helps to protect consumers from fraud by establishing a tracking system whereby consumers will be able to check if a loan officer is duly licensed. Strict standards for licensing of mortgage bankers, brokers, and mortgage loan originators (now called MLO’s) was established. Good loan officers do not grumble about being licensed OR tested. We work for the good of our clients. However, here is the big surprise. While we loan officers KILL ourselves studying and passing a national test as required by the SAFE ACT, those who work for an insured depository or its owned or controlled subsidiary that is regulated by a federal banking agency, are exempt from licensing AND testing! Some of us consider this not only unfair but unconstitutional. However, since we loan originators with bankers or brokers are educated and tested, we do have an edge and can claim the knowledge a consumer is looking for.
Back to the SAFE ACT, MLOs must pass a rigorous national test, participate in and complete a pre-licensure education course of 20 hours for the National Component, and take annual continuing education courses. The SAFE Act requires submission of fingerprints to the Nationwide Mortgage Licensing System (NMLS as it is called — OH, THOSE ACRONYMS!) for submission to the FBI for a criminal background check. Originators must also be trained, tested, and licensed by each state where they originate. State licensed mortgage loan originators (MLO’s) are to provide authorization for the NMLS to obtain a credit report.
Again, loan officers who work for a banking institution are totally exempt from all of this, testing and education (which costs a total of about $400 PLUS, not counting the cost of each state license and some are $300!). However, these loan officers get the privilege of being registered within the NMLS and receive a unique identification number. Wow, do they rate.
Now onto MDIA, TILA, and RESPA rules. Many of the rules pertain to the timing of disclosures to borrowers and transparency which isn’t all bad. However, it has of necessity increased the waiting periods for borrowers to close on their loans and get their money as well as increased the paperwork they have to sign.
When rules and regulations that were supposed to help consumers turns into closing delays then we complain! Now, preventing deception and unfair lending practices is something most loan officers are in favor of, with the exception of the dishonest ones. However, in ridding the industry of some bad apples (bad loan officers), HUD and our government has thrown the baby out with the bath water!
This has literally been, for the past couple of years, a federal crackdown on the mortgage industry, a HUGE overhaul, a FLOOD of information raining down on all loan officers and affecting Reverse Mortgages as well as Forward Mortgages. It’s going to take some getting used to. But we’ll weather the storm.
Let’s talk about MDIA. What is MDIA, another one of those acronyms. (As a side note, I sometimes laugh when I think of all the acronyms we are supposed to remember: HMDA, (we call is HUMDA), HOEPA, TILA, RESPA, HVCC, QVCC, and I joke and say we forgot one: DUMDA!!
MDIA stands for Mortgage Disclosure and Information Act which took effect July 30, 2009. Here is a quote from an ezine I found explained it all very well: “Within HERA, Congress included amendments to TILA which are known as the Mortgage Disclosure Improvement Act of 2008 (MDIA). On October 3, 2008 Congress further amended the Mortgage Disclosure Improvement Act as part of the enactment of the Emergency Economic Stabilization Act of 2008 (Stabilization Act). With the enactment of HERA and the Stabilization Act, the Federal Reserve Board is now amending Regulation Z (Truth in Lending Act) with all provisions of the MDIA and making these changes effective as of July 30, 2009.”
http://ezinearticles.com/?The-Mortgage-Disclosure-Improvement-Act-(MDIA)&id=2679397
Now here’s the tricky part. Under MDIA, disclosures are required for “any extension of credit secured by the dwelling of the consumer.” The time frame is as follows: three business days from when a borrower signs an application they must receive a Good Faith Estimate and a Truth in Lending disclosure. This one surprised me because I NEVER give a borrower an application without also giving a Good Faith Estimate as well as the TIL, Truth in Lending disclosure. Perhaps in the Forward world more regulation in this regard was needed. Who can tell.
To quote this ezine again by David Alan Miller, a 19 year mortgage veteran, there is a time constraint on when a new loan can close. “The earliest a transaction can possibly close is seven days after the initial disclosures have been issued by the lender (delivered in person, mailed, emailed, etc.). This is assuming no re-disclosure is required.”
Here is more info on the MDIA ruling:
“1. MDIA implements a 3-7-3 rule that creates new timing and waiting requirements with regard to the issuing of Truth-in-Lending disclosures and when closing can occur. The 3-7-3 rule requires the lender to:
a. Upon the taking or receipt of a loan application, provide an initial Truth In Lending(TIL) to the borrower(s) within 3 business days of the application (no change to current requirement).
b. Impose a waiting period BEFORE allowing a mortgage loan to close. The waiting period requires a lender to wait until the 7th business day following the delivery or mailing of the initial TIL to the borrower(s) before a creditor may close any loan. The 7 day period may be waived only if there is a bonafide and/or extreme and/or urgent reason to do so. This would be handled in the same manner as a waiver of rescission, which is virtually impossible to achieve. Therefore, there will be virtually no waivers of the 7 day waiting period.
c. Impose an additional 3 day waiting period before a loan may close in any instance in which the Truth In Lending(TIL) is outside of regulatory tolerances (e.g., for regular or fixed rate loans more than .125% and for irregular loans more than .25%). The 3 day period begins with the mailing of the TIL. A corrected TIL is required whenever a TIL is outside of regulatory tolerances.
d. The TIL may be mailed via regular mail or overnight or by e-sign or e-mail. However the lender sends the TIL, they must still comply with the 3 day waiting period. MDIA does not assume a quicker waiting period might occur and does not allow the lender to proceed until after the 3 day waiting period has ended.
2. Lenders can under no circumstances collect any upfront fees prior to the consumer’s receipt of an accurate TIL unless the fee is to cover the cost of the consumer’s credit report.”
http://www.hud.gov/news/speeches/2008-11-12.cfm
Folks, having had Epstein Barr Virus years ago, I’ve got to pace myself; so I will continue this blog tomorrow– and I won’t start writing it at 3 o’clock in the morning! My neck is aching, and I’m getting droopy. But at least we’ve taken a chunk of information and gotten through just some of the new changes that will affect your loan, most for the better. Stay tuned — more to come in the wacky world of mortgaging!
Oh, before I forget, here are some great blogs:
http://www.DennisHaber.com
http://massachusetts-reverse-mortgage.com/
Kathie Adler - Reverse Mortgage Blog 