Why the mortgage process seems so different

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Many changes occurred in the mortgage industry over the last couple of years. In this post, I want to spend some time highlighting a few of the major changes.

Non bank loan officers now must be license and bonded. They are required to take federal and state tests, have good credit and complete continuing education in order to keep the license. This is a very good improvement for our industry. Now the requirements to be a loan officer for a non-depository institution (in other words, a company that isn’t a bank) are the highest in the industry to both earn and maintain a license. This has caused a lot of loan officers to exit the industry or go to work for a bank.

The next time you apply for a loan, remember the loan officer that does not work for a bank is the only licensed professional in the mortgage industry which has passed a federal and state test, is bonded, passed a background check and is required to take continuing education courses.

The new Good Faith Estimate has been enacted by HUD. The government attempted to create a process which is less confusing for the consumer and easier to understand the cost associated with the mortgage process. Things haven’t exactly gone to plan. In some ways, the new form is more confusing. The confusion mostly stems from increasing the size of the good faith estimate from a one-page form (which disclosed all the fees individually) to a three-page form (that only shows lump sum fees). Since the introduction of the new good faith estimate, some consumers feel it has created more confusion than clarity.

Regulation Z has been enacted by the Federal Reserve. This regulation has had a lot of controversy around the requirements it imposes on the mortgage industry. There are many facets to Regulation Z, and it really deserves a post (or two) by itself. In short, the Federal Reserve claims these regulations will protect the consumer. However, many professional in the industry argue it creates greater confusion to the consumer and restricts competition. Traditionally, any restriction in competition usually leads to an increased cost placed on the consumer. Rather than trying to explain the details of this complicated rule, just know the consumer is always best protected by getting 2 or 3 quotes to insure they are getting a competitive rate.

These are the main events that have occurred in the last 18 months. More change is coming soon when the consumer protection bureau takes control in late July. This new government entity is a result of the Frank Dodd Act.  The mortgage industry has gone from limited government intervention to extreme intervention since the mortgage crisis. I am amazed that loan officers which do not work for a bank have been required to pass tests, required to take 20 hours of education, required bank ground checks, and continuing education, while loan officers that work for bank are not required to meet these guidelines. It is ironic that bank employees are given the least amount of training, regulation, and oversight with all the new guidelines.

The one thing to remember in all of this is to make sure you always get a quote from a non-bank loan officer when looking for a mortgage. The non-bank loan officers are now the most trained and educated in the entire mortgage industry.

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2 Responses to “Why the mortgage process seems so different”

  1. Gmac Home Loans Says:

    It’s a positive move toward consumer protection and housing market stability. I think inaccurate appraisals influenced by lenders and brokers contributed to the industry breakdown, so more regulation may be a necessity to protect consumers and investors.

  2. house repossessions Says:

    house repossessions…

    […]Why the mortgage process seems so different « The Mortgage Blog[…]…

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