Monthly Archives: May 2015

The Good Faith Estimate Revisited: 8 Questions that must be Answered

BusThe Good Faith Estimate is a key document that mortgage loan originators will need to provide to borrowers. Therefore, assuming the perspective of borrowers should help mortgage loan originators best complete the form, providing information that borrowers will need and value. This change in hats guides mortgage loan originators in how to best complete the form. Below are 8 questions that the Good Faith Estimate should be able to answer for the borrower.

1) How much am I borrowing?

On the first page of the Good Faith Estimate form, is a section entitled “Your initial loan amount is”. This box should state the purchase price of your home, with an additional amount stemming from any closing costs not covered in cash by the borrower. However, confirm whether the charges are valid.

2) What’s my interest rate?

This is a straightforward question with a straightforward answer. Beneath the “Your initial loan amount is” section should be a “Your initial interest rate is” box. Here you should find the interest rate agreed upon by lender and borrower.

3) What’s my monthly payment?

Again, beneath the “Your initial interest rate is” section is a box which states your monthly payment. Take a moment and double check if it’s the correct amount that includes principal, interest and monthly premium payments (in cases where you’ve put less than 20% down), according to the terms of your loan.

4) Is this a fixed-rate or adjustable-rate loan?

This is an important detail many home buyers overlook—whether they have an adjustable-rate or a fixed rate mortgage. Hence the consequent surprise and anguish when home buyers see their payments rise. However, the Good Faith Estimate contains a box called “Can your interest rate rise?” This section will tell you whether you have an adjustable- or fixed rate loan.

5) Is an escrow account required?

If your lender collects your taxes and insurance premiums in order to pay on your behalf, and beneath the section “Escrow account information”, “Yes” is checked, then you’ll need an escrow account to add these costs to your monthly payment.

6) What’s the cost of taking out this mortgage?

Since mortgage loan originators are providing a service, they charge an origination fee for processing a loan. Luckily, this fee can found in the “Our Origination Charge” section at the top of the second page of the Good Faith Estimate. On average, these fees are in between the range of 0.5% and 2% of the loan.

7) Am I being charged points?

Discount points, that is, which are interest prepaid in exchange for a lower rate. The lender should discuss this with you before closing. The box entitled “Your credit or charge (points) for the specific interest rate chosen” contains all the information relevant to discount points.

8) How much am I paying for an appraisal?

Ironically, appraisals costs money. To determine how much your appraisal is, look up the section called “Required services that we select”. Here you’ll find how much your appraisal costs.

These questions will inform the home buyer and also guide the mortgage loan originator in how to interpret the Good Faith Estimate.



Ever-Changing Charges of the Loan Estimate

costsThere are many charges found under the Loan Estimate, one of two new integrated disclosure documents to be adopted on August 1, 2015. The charges vary in amount and are triggered by certain conditions. Key to understanding these conditions is knowing what qualifies as a changed circumstance. The textbook definition states that a changed circumstance is “an extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction”. Sounds pretty vague, doesn’t it? Well, that’s why lawyers exist. Jokes aside, both mortgage loan originators and consumers will gain from studying these conditions thoroughly.

Cases where mortgage loan originators may charge more than disclosed on the Loan Estimate generally stem from tolerance thresholds. When the amount charged falls within explicit tolerance thresholds—excluding zero tolerance charges—mortgage loan originators may charge more than what is stated on the Loan Estimate. Further, if a consumer opts for a third party’s services, the charges and recording fees incurred by the consumer are subject to a 10% cumulative tolerance charge. Should the sum of these charges not exceed 10% of the amount on the Loan Estimate, mortgage loan originators may charge more. Mortgage loan originators may even charge consumers fees not included in the Loan Estimate, as long as the sum of these charges do not exceed the sum of all estimated charges by more than 10%.

As referenced above, there are zero tolerance charges under the Loan Estimate. These charges include fees paid to the creditor, mortgage broker or an affiliate of either. Transfer taxes and fees paid to an unaffiliated third party are also considered zero tolerance charges. Tolerance limitations aside, mortgage loan originators may change charges on prepaid interest, property insurance premiums and amounts placed into an escrow or similar account.

However, the see-saw of potential charges aren’t completely tilted in mortgage loan originators’ favor. If the amounts paid exceed the amounts disclosed on the Loan Estimate beyond the tolerance threshold limits, mortgage loan originators must refund the excess within 60 days after consummation.

Ultimately, the key to understanding Loan Estimate charges is to first play semantics and determine what qualifies as an extraordinary event and then to understand the threshold tolerance in all its applications and permutations. Lastly, mortgage loan originators ought to seek training, if the process still seems confusing.


Five Questions to Know Whether You Are TRID Ready

Business_presentation_byVectorOpenStockThe great tidal wave, otherwise known as TILA-RESPA, is coming—we keep saying—August 1, 2015. Go ahead and take a minute to reflect on the implications of this rule for the mortgage industry. “What’s the big deal about a couple of new forms I’ll have to fill out?” you may wonder. But this rule is so much more, as it will systematically affect the entire mortgage application process, from, yes, the required forms to be filled, down to the vendors with whom you do business. Compliance with the rule, therefore, requires research, preparation and training.

If you’re starting to feel anxious, don’t worry. Here are five questions that will help gauge how ready you are.

1) What are the TILA-RESPA Disclosure Documents and Requirements?

We’ve belabored the new documents (basically the Loan Estimate and Closing Disclosure) that will need to be provided to consumers in earlier posts. So we’ll gloss over this and just reiterate the documents essentially reshape the presentation of content to facilitate better comprehension of terms by consumers. Further, the new regulation has minute details on how the content varies by loan. The good news for you is that compliance should boost consumer satisfaction and retention.

2) What is the impact to my business process and workflow?

We alluded to the chain reaction that adoption of the TRID rule will cause above; but specifically, you’ll need to reconsider you’re current business relationships in order to determine who will satisfy which requirements within the stipulated window of time. Timing requirements for the Loan Estimate is three business days after the application’s completion, and three business days prior to consummation for the Loan Disclosure. These requirements will affect the closing process, so be sure to sort out who is doing what before August 1.

3) What are the effects on my software systems?

This is the behemoth of the new regulations, but data systems and dual requirements are the gist of this clause. You’ll need to determine whether you’re documentation systems can support both the new and existing disclosures. Some transactions (such as home equity lines of credit, reverse mortgages and/or mortgages secured by non-real property) are exempt from the new disclosure, and will instead use the current forms. That covers dual requirements. For data systems, new calculations and data points, which will vary with each loan agreement, will need to be tracked by your software systems. Therefore, it’s imperative you confirm whether your systems can handle these changes.

4) How are my vendors handling the changes and what is their level of readiness?

Flex your interpersonal muscles and find out what your vendors have done to prepare for the new TRID rule. Schedule meetings and have a “tell-all” session. Remember: transparency is key at this stage, because implementation is only a few months away.

5) What is my training plan?

Feeling overwhelmed? Don’t be. You can always fall back on training to get you and your team TRID ready. First, ensure that all of your staff have been vetted and are aware of their new roles/duties. Then, if the learning curve proves too steep, consult Ameritrain Mortgage Institute’s client services to help get you trained.



Wait: What Exactly is a Mortgage Loan Originator?

SuitsMortgage Loan Originators are essential members of the mortgage loan closing process. They serve as intermediaries, negotiating terms on behalf of consumers—but still are employees of mortgage lenders—working either for a private bank or non-depository institution (such as brokers or, again, lenders). Mortgage originators’ primary responsibility involves procuring new business for mortgage companies. Originators market their lenders to borrowers in an attempt to secure the borrowers’ business; referrals are the name of the game, as originators can then furnish applications to prospects, initiating the first step in the loan closing process. Therefore, borrowers first meet mortgage loan originators when approaching agencies for a loan.

Make no mistake: mortgage loan originators work in sales, with all the excitement and human interaction that entails. Originators, therefore, have advanced interpersonal skills coupled with the enjoyment of using these skills to communicate. But originators don’t merely hold hands with borrowers, guiding them through the loan closing process; Originators also interact with underwriters, servicers, processors, etc. along the way. Originators review applications, ensuring borrowers are qualified, which requires originators to have an acute understanding of the law and ensure compliance. Additionally, originators must know the mortgage products they sell thoroughly, since they negotiate loan terms and sign applications.

So how do you become one? As with most things in life, to become a mortgage loan originator training is required. Mortgage originators, who choose to work for a non-depository institution, must apply for a loan originator license in the state in which the originator wishes to practice. To this, a host of mortgage schools—Ameritrain Mortgage Institute among them—exist to provide the requisite training. Prospective originators will need to complete 20 hours of pre-license education, then pass a national exam, administered by NMLS (National Mortgage Licensing System), to officially start practicing.

In the aggregate, mortgage loan originators are well-compensated and report high levels of job satisfaction, which doesn’t sound like a bad bargain.