Mortgage Rules Ever Changing Part 2

In this second part of “Mortgage Rules – Ever Changing” I’ll address how the government adds costs to the mortgage and time to get the mortgage for the consumer. The mortgage market is not just regulated by one government agency as it should be for efficiency. But mortgages and the banks, investors, lenders, and mortgage brokers that originate mortgages are regulated by no less than a dozen government agencies.

No that any market or business including the mortgage industry shouldn’t be regulated, it should. On the other hand, the regulations need to make sense in both theory and be practical/applicable in the real world of mortgage origination. Furthermore, the mortgage industry should have to take it’s regulatory direction from one government agency not a dozen or more.

When you have multiple government agencies regulating any one business or industry including the mortgage market you end up with over-regulation, redundancy, pointless delays in closing and conflicting rules. All three of these are not good for business and all three add to the costs of the ultimate recipient of the mortgage, the borrower/consumer.

Here is just a sample of the agencies that regulate the mortgage industry: HUD/Department of Housing and Urban Development, FHA/Fair Housing Administration, FDIC Federal Deposit Insurance Corporation, Fannie/Mae & Freddie-Mac, FRB Federal Reserve Board, FTC Fair Trade Commission, NMLS/National Mortgage Licensing System, OCC/ Office of Comptroller of The Currency, FCA Farm Credit Administration, OTS/Office of Thrift Supervision and the list goes on and on and on…

Not only do you have too many agencies regulating the mortgage market you have elected officials and bureaucratsthat have never worked in the mortgage industry or originated a loan making rules without realizing how they will negatively effect the consumer. It would be like me making rules for physicians when I have never practiced medicine!

Here is a real-life example of a rule that adds nothing but time to the loan process, which costs the borrower money. If a borrowers change in closing costs cause the APR to go up or DOWN by more than .125% the loan cannot close for an additional three days after the borrower has been notified of this change.

Ok if the costs are going up it makes sense to disclose it to the borrower so they can decide if they want to proceed. But if their closing costs are going DOWN it is to their benefit – why wait three more days to close the loan? I mean if you were to buy a car for $20,000 but when you went to pay  for it and they said it was only going to cost $19,000 would you want to wait 3 days to get the care? of course not you would be thrilled driving off the lot saving money. Now why would having lower closing costs be any different?

Additionally, what if it was a bonafide expense? If the client thought they had a survey and didn’t but needed to get one in order to close. Why can’t the client sign a waiver statig that they understand the costs went up but they want to close right now not three days later, because the movers are out in front of the home with all of their things ready to move-in?

Now the next time you wonder why it can now take 30-45 days to close your conforming mortgage, jumbo mortgage, or super jumbo mortgage instead of the “old normal of 15-30 days” you can blame the government and their redundant and sometimes silly regulations.

This entry was posted in Mortgages, Uncategorized and tagged , , , , . Bookmark the permalink.

Leave a Reply