Mortgage

HMDA Analysis Shows Lenders Could Add Significant Revenues

April 2014 Industry News - Mortgage Payment PriorityAn analysis of the 2013 HMDA data shows that lenders are missing opportunities; There is a gap in the approval rates between lenders. Some lenders have approval rates on non-conventional loans of as low as 11 perfect, where they typical rate is between 60-80 percent from larger lenders.

More importantly than this, Mortgage TrueView found that just an additional 10% of approved loans could increase a lender’s revenue significantly.

They pointed out two clear cut examples:

There was a specific smaller lender with 3,700 loan applications, with only 12% (445 loans) approved. If that lender were to increase its approvals by 8% to just a 20% approval rate (740 loans), the lender would see an additional $150,000 in revenue (based on a conservative $500 profit per loan).

Mortgage TrueView also looked at a larger lender. This lender had 150,000 applications and approved 93,000 loans (62%). The lender saw revenues of $46.5 million (based on the same conservative $500 profit per loan). If that lender increased its approved loans to 108,000 (just 10%), it would reach revenues of $54 million dollars.

Mortgage TrueView believes the huge discrepancy between approval rates of large lenders and small lenders is based off three determining factors: bias in the approval process, borrowers aren’t qualified, but mainly – loan denials are due to the lenders’ process itself – and how they execute it.

Lenders with higher loan approval rates – and higher revenues – tend to have very strong technology, or strong non-conventional lending programs (or both). The more streamlined the process – the more loans (ie more revenue) a lender is able to produce.

 

Read More

Category : Blog &Mortgage

Understanding TILA-RESPA Integrated Disclosures Rule

download (3)Sections 1098 and 1100A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) direct the CFPB to publish rules and forms that combine certain disclosures that consumers receive when applying for and closing on a mortgage loan under the Truth in Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act (Regulation X).

The TILA-RESPA Integrated Disclosures Rule’s purpose is to improve the way consumers get loan information when they apply for and close on a mortgage. On August 26, 2014, the CFPB and Federal Reserve Board co-hosted a webinar to address questions about the final TILA-RESPA Integrated Disclosures Rule that will be effective for applications received by creditors or mortgage brokers on or after August 1, 2015.

This rule effects two major federal regulations, consumers’ experience in shopping for and closing on mortgages, and almost the entire residential real estate industry. The requirements are about two disclosure documents, the Loan Estimate and the Closing Disclosure. After proposing the initial rule, the CFPB received over 3,000 comments, which they analyzed before responding. After finalizing the rule, it is important to understand the differences between the proposal and the rule itself, as well as what the rule does.

 

It’s important to understand the difference between the proposal and the rule as there were many significant changes.

What The Proposal Said The Final Rule
“all-in APR” In the proposal, it would have changed the definition of the finance charge, which is used to calculate the annual percentage rate, or APR Not included as it would have cost industry a lot and affected available loans to consumers, however this is still under review.
Waiting period after Closing Disclosure before closing the mortgage Lenders should reissue that disclosure with any changes, followed by a new three-day waiting period New waiting period comes only if there are substantial changes to the APR, the loan product itself changes, or the lender adds a prepayment penalty. Also consumers have the right to examine the Closing Disclosure on request the day before closing
Machine-readable record retention Required Not required, but additional study and discussion will occur
Issuing the initial Loan Estimate Required lenders to issue the initial Loan Estimate within three days of a consumer applying for a mortgage; Saturdays were included in that time frame To compensate for the burden this would cause for Community Banks and Credit Unions, the three-day rule only includes days the lender is actually open

 

Now that we understand the key differences, it’s important to understand the rule itself. The final rule applies to most closed-end consumer mortgages. It would not apply to home-equity lines of credit and reverse mortgages. The new rule contains new rules and forms for two disclosure forms consumers receive in the process of getting a mortgage loan: the Loan Estimate, and the Closing Disclosure.

mortgagecompliancemagazine.com

mortgagecompliancemagazine.com

 

The Loan Estimate must be provided to the consumer within three business days (days the lender is open) after application, this replaces the “Good Faith Estimate” required under RESPA and the “early Truth-in-Lending” required under TILA. If a lender decides to use a mortgage broker, the lender still retains responsibility for ensuring the consumer is provided the Loan Estimate. The consumer may not be charged any fees until after the Loan Estimate is provided and the consumer has decided to proceed with the transaction (exception for the costs of credit checks only).

 

The lender is required to give the Loan Estimate if the consumer provides the following: Consumer name, income, social security number (for credit report), property address, estimate of the value of property, mortgage loan amount sought). The “other relevant information” currently permitted under RESPA has been removed from the current rule, however creditors are able to collect whatever information deemed necessary for the extension of credit as long as they can provide the Loan Estimate once the above six pieces of information are given.

 

The Closing Disclosure merges and replaces the final “TIL” statement and the RESPA-required HUD-1 settlement statement. It is five pages long and combines five pages of old forms, plus new disclosures required by the Dodd-Frank Act. The Closing Disclosure is required by the new rule and reflects the actual terms of the transaction. The creditor is required to make certain the consumer receives the Closing Disclosure no more than three business days before consummation of the loan.

The Closing Disclosure must contain the actual terms and costs of the transaction. Creditors may estimate disclosures, however, they must act in good faith and use due diligence in obtaining the information. The Closing Disclosure must be in writing, and if the actual terms or costs of the transaction change prior to consummation, the creditor must provide a corrected disclosure that contains the actual terms of the transaction.

 

This was the first of many webinars, and according the to CFPB, will be hosted in a Q&A format to facilitate clear guidance. Industry members have historically preferred written guidance.

The CFPB has announced they will soon release additional guidance on their website, including (but not limited to) a timing calendar for various requirements under the new rule.

 

Next webinar date: October 1, 2014 – to cover Loan Estimate and Closing Disclosure content.

 

CFPB Disclosure Forms & Compliance Guide

Read More

Category : Blog &CFPB &Mortgage

Large Lenders To Open Credit Box

Nonprime loans help borrowers with low credit scores become homeownersThe Credit Box Opens

Since the great depression, housing starts have nearly doubled. More recently, strong investors have been buying properties in distress at a insatiable rate, driven by low house prices and strong rental demand, but as that trend began it’s decline, first time homebuyers have stepped up to fill the void. These shifts have helped stimulate much of the United State’s economic growth. Although mortgage rates are still low (historically speaking) they have risen overall in the past few decades.

The constriction of credit is driven by multiple factors. First, lenders have reassessed how much risk they are willing to take on, often due to the increased cost of servicing distressed borrowers and the legal risks with servicing defaulting loans. Also, rising interest rates coupled with a smaller refinance market has changed the industry’s resources for refinancing. These factors joined with ever changing rules and reforms are keeping lending tight. Therefore, easing mortgage lending standards to help new homebuyers obtain loans is crucial to our economic recovery. Currently, new homebuyers are close to dominating the market; with Texas and Colorado leading the way.

The reasons for the tight credit box are as complex and vast as the solutions, but it seems large lenders will step up to the plate, and be the first to open up the credit box.
According to Fannie Mae’s third-quarter Mortgage Lender Sentiment Survey (which polls senior executives of its lending institution customers), large lenders are more likely to ease their credit standards in the next three months, with an emphasis in non-GSE-eligible and government loans. Fannie Mae suggests this could indicate an effort to boost purchase mortgage before the end of the year.
Doug Duncan, senior vice president and chief economist at Fannie Mae believes they are tapping into this market to “maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end”.

This trend is already evident, as Citigroup and Bank of America announced they will begin offering mortgages at discounted interest rates to help borrowers with low incomes or subprime-credit histories. Wells Fargo reduced some of its standards in August for high-priced loans.

Read More

Category : Blog &Mortgage

Contact Us

336-608-3323 (Office)
336-749-3697 (Mobile)
336-993-2777 (Fax)

[email protected]

ValPros
1400 Old Mill Circle Ste C
Winston-Salem, NC 27103

Testimonials

ValPros consistently provides our company an unparalleled level of customer service and timely production of our appraisal needs. - Luv Homes of Winston Salem

This is a definitive recommendation for ValPros because of their willingness to work, talk, educate and jump through hoops. - Phoenix Housing Group, Inc.

We have been doing business with ValPros for 5 years and always are satisfied with the quality of work and customer service.

Jared was a very nice person to work with. I appreciate the detailed work that has gone into this appraisal. I will recommend your office to anyone in need of your service. - H. Conrad





We Hold Ourselves to the Highest Ethics

Learn More

Powered by Mindstorm Media

Send to Friend

Email Agent