December 31, 2009 1:46 PM
New Rules Will Improve Mortgage Finance Disclosures
The new federal government home mortgage finance rules requiring better disclosures to consumers beginning 1/1/2010 are a step forward, but more improvement is needed. They were watered down over the many years it has taken to develop the current rules. At the end of the day HUD officials in both the Bush and Obama Administration deserve the thanks of consumers for stiffening their resolve in the face of intense lobbying pressure from mortgage brokers, lenders, title insurers, and real estate brokers to abandon the process. They were able to get nearly half of Congress to sponsor legislation that would have prevented the new rules from being implemented. Lead sponsors of that legislation, Reps. Judy Biggert, R-Ill., and Ruben Hinojosa, D-Texas, failed recently in their last ditch attempt to delay the implementation of the new RESPA rules. Last October they sought unsuccessfully to amend the bill that would create a Consumer Financial Protection Agency.
I learned of one of the remaining problem areas when I went to settlement on the refinancing of the mortgage on our home this past Wednesday. Our new monthly mortgage payments turned out to be about $200 per month more than the estimated amount in our Good Faith Estimate. The difference was that the estimated property tax and hazard insurance figures in our GFE were $200 less than the actual amount we have been paying. We provided our current real estate taxes and property insurance numbers to our mortgage broker before he gave us the GFE. We assumed he would use those numbers in his estimate and therefor didn't bother to check them. As a result the low GFE monthly payment estimate he gave us made us smile, and certainly reinforced our decision to go forward with the refi.
One thing the new rules do not address is problems like this. Curious as to whether there is a tendency for mortgage brokers to low ball taxes and insurance to make their GFE new mortgage payment numbers look better than they actually will be, I asked the settlement service executive what share of the refis that come to her with GFEs in which the mortgage brokers used very low and obviously incorrect real estate tax and insurance amounts rather than the homeowners current actual payments. "Most of them", she told me. This and a number of other RESPA problems need to be addressed, but at least we're making a start.
I learned of one of the remaining problem areas when I went to settlement on the refinancing of the mortgage on our home this past Wednesday. Our new monthly mortgage payments turned out to be about $200 per month more than the estimated amount in our Good Faith Estimate. The difference was that the estimated property tax and hazard insurance figures in our GFE were $200 less than the actual amount we have been paying. We provided our current real estate taxes and property insurance numbers to our mortgage broker before he gave us the GFE. We assumed he would use those numbers in his estimate and therefor didn't bother to check them. As a result the low GFE monthly payment estimate he gave us made us smile, and certainly reinforced our decision to go forward with the refi.
One thing the new rules do not address is problems like this. Curious as to whether there is a tendency for mortgage brokers to low ball taxes and insurance to make their GFE new mortgage payment numbers look better than they actually will be, I asked the settlement service executive what share of the refis that come to her with GFEs in which the mortgage brokers used very low and obviously incorrect real estate tax and insurance amounts rather than the homeowners current actual payments. "Most of them", she told me. This and a number of other RESPA problems need to be addressed, but at least we're making a start.
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