Frank Ceizyk
The newest lending guidelines have created a wave of new "tricks of the trade", making it more likely you will be overcharged for a loan, and giving the lenders control of your transaction by potentially holding your appraisal hostage. Let me explain:
MDIA-The Mortgage Disclosure Information Act: This basically requires that you have 4 days from your initial application to receive disclosures from the LENDER that are supposed to reflect what your broker initially disclosed on your application.
THE PURPOSE: The guidelines are intended to prevent lenders from charging "more" at the end of a transaction, and then trying to strong arm you into signing. If the APR on the final cost estimate exceeds .125% of your original, the lender gives you 7 days to decide if you want to cancel.
THE TRICK: This guideline encourages lenders to "overdisclose" on your initial application. Customers are being told that it is just an initial disclosure, and the final rate/fees will likely be lower. However, they are not bound by anything to honor an oral agreement to lower your rate at a future date, so if you signed the initial application with the fees purposely overdisclosed, you're stuck!
HOW TO AVOID THE TRICK: Don't sign an initial application if it has been "overdisclosed". Don't accept any oral commitment to "float" your rate down. Unless it's in writing, the lender is legally able to charge you a higher rate at closing. If a lender refuses to send your lock-in terms in writing, send a nice letter to the Department of Financial Institutions-or at least threaten it. If they suddenly change their tune, you should change lenders.
HVCC-Home Valuation Code of Conduct: this requires a "roulette" style assignment of an appraiser to prevent mortgage, real estate and consumers from influencing an appraiser to "hit" a certain value.
THE PURPOSE: The guidelines was intended to prevent large real estate and mortgage "under one roof" shops from retaining in house appraisers that could (and very often were) influenced to obtain values to enable financing and purchase transactions to be completed.
THE TRICK: Each lender has created their own "AMC"-Appraisal Management Company, with their own "approved" list of appraisers. The guideline says that each lender must transfer the appraisal to another lender if the consumer requests. The problem: The lenders will not ACCEPT an appraisal done by another lender's AMC, which means if for any reason your loan is declined, and/or your mortgage loan professional doesn't honor the rate they quoted, your only option is to buy a new appraisal with a new lender!!
HOW TO AVOID THE TRICK: Get your credit approval (providing all income, asset information up front) done before you authorize the appraisal be ordered, and get your lock-in quotes in writing. If you don't get what you were promised in writing, send all your documentation with a nice letter to the Department of Financial Institutions.
Many more changes are coming, many new programs are being created, and as always, I am here to answer questions you may have in the constantly evolving world of mortgage finance.