What is going on in the mortgage industry?

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As many of you are aware the lending/mortgage industry has been going through a tremendous amount of change over the last year.  The changes have greatly affected all aspects of the mortgage industry and additional regulation is going to occur over the next 12 months.  Here is a brief recap of the last 15 months:

–          Fannie Mae and Freddie Mac tightened underwriting guidelines and increased fees (which increases interest rates for consumers) based on property type, credit score, loan type, and loan to value ratios.

–          Home Valuation Code of Conduct (HVCC) went in affect which requires a third party management company to manage the appraisal process.  This has actually increased the cost of the price of the appraisal to the consumer and has made it more difficult to get a house to appraise for a refinance or purchase.

–          Mortgage Disclosure Improvement Act (MDIA) went into affect and requires additional disclosure and an increased waiting period when a consumer wants to purchase a home or the loan scenario changes.

–          Safe Act will be implemented over the next few months by Federal and State mortgage agencies.  This will require loan originators to take 20 hours of education, pass a federal test, pass a state test, pass federal background check, and have good credit.  It is estimated this act could eliminate 25-40% of the mortgage originators in the industry.

–          FHA eliminated down payment assistance and requires home owners to put 3.5% down to purchase a home through the Federal Housing Authority.

–          The Real Estate Settlement Procedure Act (RESPA) will change at the beginning of 2010.  The government changed the act in hopes to make it less confusing for the consumer.  The changes include a new good faith estimate turning a one page document into a 3 page document.  The hopes by the government are the 3 page document will be less confusing then the current 1 page document (more on this topic from “the mortgage blog” coming this week!).

–          Congress just passed a new bill called the Consumer Financial Protection Agency which still has to pass the senate.  This bill will eliminate some of the changes discussed above but result in other changes which will require more regulation for this industry.

So what does all this mean?  Well, the pendulum has swung — we have gone from limited regulation to over regulation in a matter of 24 months.  Most in the industry are uncertain if the changes are good or bad for the industry.  I am certain in the future, it will be a smaller industry, with less competition, higher credit standards, and higher costs to the consumer.  So if you know somebody in the mortgage industry, give them a hug or a referral they sure could use it!  Better yet, if you are in Georgia, give us a call (hug is very optional).

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One Response to “What is going on in the mortgage industry?”

  1. Deon Orrison Says:

    Hello – just a quick note to say kudos for this article. Very great.

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