What To Expect When Buying A Home in 2011!!

This too shall change……the theme of 2009. The Mortgage Lending World is controlled by 8 different Regulatory Agencies. Unfortunately, some of these agencies are governed by more than one entity, with no communication among them.

Whether you are buying your first home or you are in a domino effect where your closing depends on the sale of your current residence, you need to be prepared. If your buyer or the buyer's lender does not comply with the rules, all closings could be delayed. Following is a list of obstacles that could cause you to close “Late and Ugly”:

HVCC - Home Valuation Code of Conduct—effective May 2009

•  Conventional mortgages require the appraisal be ordered thru a disinterested third party, “A Middleman.”
•  Lenders must provide a copy of the purchase agreement but are prohibited from speaking with the appraiser about the value.
•  HVCC requires the lender to provide the borrower 3 days to “review” the appraisal and the loan cannot be closed until the 3-day waiting period has elapsed.
•  FHA now requires a disinterested third party and no communication as well but the waiting period and the viewing of the appraisal do not apply to FHA.

MDIA - Mortgage Disclosure Improvement Act—effective July 30, 2009

•  Disclosure - If anything changes during the processing of the loan—(loan terms, down payment, closing costs, etc.) that affects the APR (by more than 1/8% variance) another disclosure must be sent to the consumer.
•  Waiting Periods - The consumer is given “time” to review all disclosures. The initial disclosures require a 7-day waiting period and the re-disclosure for the APR variance requires a 3-day waiting period. Business days have been defined as Monday thru Saturday, except federal holidays.

HPML - Repayment Ability Requirements a/k/a “Higher-Priced Mortgage Loans” – effective October 2009

•  When the interest rate is locked on your mortgage loan the spread between the Annual Percentage Rate (APR) and a survey-based estimate of APRs currently offered on prime mortgage loans of a comparable type is measured by inputting the amortization type, lock-in date, APR, fixed term (loan maturity) or variable term (initial fixed-rate period), and lien status into a government calculator.
•  This measurement is completed again at the time the closing papers are prepared.  If your loan is considered to be a “High Priced Mortgage Loan”, additional underwriting conditions may be required.

RESPA - Real Estate Settlement Procedures Act – effective January 2010

RESPA-    Is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD. 
Uniformity -  Every lender is required to use the same good faith estimate form.  It includes detailed mortgage loan terms and estimated closing costs.
New Good Faith Estimate -  Because the new good faith estimate form only takes into account fees that the lender requires for the loan, we will also provide with you with a borrower's cost summary.  The cost summary takes into account all of the relevant fees needed to calculate how much the borrower needs to bring to closing (broker fees, home warranty, inspections, etc).

•  You want to make sure that closing dates are flexible and there are no penalties for not closing on the specified date. These federal laws do not care what date you have negotiated

•  No last minute down payment changes—like Grandma wanting to give a $10,000 gift 2 days before closing

•  No “floating the interest rate” until the last minute. Buyers should lock the interest rate at least 7 to 10 days before the projected closing date (the sooner the better)

•  No switching of lenders at the last minute. If a switch is made the seven day disclosure process starts over again

•  No waivers of the waiting periods – no matter how many moving trucks are sitting in the driveway

•  Notify us if ANY of the terms within the purchase agreement change. This could require a re-disclosure and delay the closing

•  Oh, and remember the appraisal disclosure plays a part in this too. Even if all loan disclosures are met, the consumer has another 3 days to review their appraisal (if conventional).

The changes are so far reaching that each and every change in the loan terms, the purchase agreement, the closing costs, the down payment—

EVERYTHING will require total communication between EVERYONE !!!