Oh, no! Trump dismantling consumer protection

 Regulations  Comments Off on Oh, no! Trump dismantling consumer protection
Feb 202017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Despite the hysterical headlines that President Trump was dismantling consumer financial protections by executive order, the truth is much less exciting.

Trump has called Dodd-Frank, the recession-era law that created the current regulatory structure, a disaster and pledged major reforms. Earlier this month, he ordered his financial team to review the law and develop a plan to overhaul it. This starts a likely many-month process to modify Dodd-Frank and other financial regulations that are stifling lending and driving community banks out of business.

While Trump conceivably could rewrite or reverse some financial regulations once his appointees take charge at various federal agencies, he cannot change statutory rules, such as those enacted through Dodd-Frank, without Congressional action.

Unfortunately for those hoping for quick action, that appears unlikely. While the House already is moving legislation to rewrite the law, Senate Republicans need help from Democrats. Senate Banking Comm Chair Mike Crapo says, “The climate right now in the Senate is as toxic as I’ve ever seen it.” Crapo hopes he can get some Democratic support for changes that will promote lending by easing rules for smaller and community banks.

The eventual changes could be significant, but the pace of change will allow for serious consideration and certainty doesn’t justify the silly headlines.

Could spot condo approval return for FHA?

 Owner-occupied, Regulations, Residential Mortgage  Comments Off on Could spot condo approval return for FHA?
Oct 242016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

We talked a couple weeks ago about the changes FHA adopted to make it easier to get FHA financing for condos. Unfortunately, the changes are temporary, but FHA is trying to rectify that by proposing new regulations that take these changes a step further and make them permanent.

The biggest news is FHA is proposing the reinstate spot approvals for condos. Typically, a condo project must be FHA-certified for its units to be eligible for FHA financing. A spot approval allows a lender to seek approval for a single unit in an otherwise uncertified project.

Another proposed change that’s receiving mixed reviews would establish a range within which FHA could set the minimum percentage of units that must be owner-occupied. Currently, the minimum is 50%. The proposed range is 25% to 75%. FHA says this would give it flexibility to respond to market conditions. Congress has suggested 35% is appropriate, and the housing industry would prefer the certainty of the fixed, lower number.

FHA also is proposing to establish a range for the maximum commercial space within a mixed-use development. The current maximum is 50%. The proposed range is 25% to 60%.

You can find the proposed rule on HUD’s Web site, hud.gov, and FHA invites your comments.

The possibility of better flood insurance

 Regulations, Residential Mortgage  Comments Off on The possibility of better flood insurance
Jun 062016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Congress is diddling with flood insurance again, and if you’re in a flood zone, you may want to pay attention. The House passed a bill about a month ago that would authorize state insurance commissioners to approve flood insurance policies that would be accepted for conventional and government mortgage loans. This means you would have a private insurance alternative to the National Flood Insurance Program (NFIP), which for many is currently the only game in town.

Obviously, the idea is that more competition will lead to more consumer choice. Consumers will be able to shop for an insurance product that meets their particular needs rather than be stuck with the current one-size-fits-all government product.

One interesting twist in the bill is that it would allow homeowners who switch to private insurance to switch back to the NFIP if they aren’t satisfied. Their NFIP insurance rate wouldn’t change as long as they don’t allow coverage to lapse.

The Senate is considering a similar bill that has bipartisan support, so it’s quite possible private flood insurance will become a reality this year.

Why are appraisals so expensive? – Part 2

 Regulations, Residential Mortgage  Comments Off on Why are appraisals so expensive? – Part 2
Jan 202016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Yesterday, we started discussing why appraisal costs have soared. We identified regulations requiring that lenders order appraisals through middlemen. Let’s look at a couple other factors.

– Regulators have increased appraisal requirements. Appraisers not only have to estimate the property’s value but also have to assess the strength of the area’s housing market. FHA appraisers now have to crawl into a home’s attic or crawl space among other new requirements.

– Finally, the new integrated disclosures regulation requires lenders to quote appraisal fees exactly at loan origination. Given that little is known about the property this early in the loan process, appraisal companies that provide the quotes must consider the risk that the property has complexities. Thus, their quoted prices have risen.

– The new regulation also has virtually eliminated the market for appraisal orders. When you eliminate market competition, you get higher prices.

The added workload and lower pay pushed a number of appraisers out of business, and the inability to control appraisal fees because of appraisal company middlemen makes the profession unattractive for potential new appraisers. As a result, a number of housing industry experts is warning of a coming appraiser shortage. For homebuyers, this initially could mean delayed closings. Eventually, it probably means even higher appraisal prices as that may be what’s necessary to attract new people to the profession.

Why are appraisals so expensive?

 Regulations, Residential Mortgage  Comments Off on Why are appraisals so expensive?
Jan 192016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

“Back in the day, I could order an appraisal for $350.” So began a conversation with a couple other “old-timers” in the mortgage industry about the current high cost of appraisals. The only problem is “back in the day” was only a couple years ago. Today, a typical conventional loan appraisal costs $500 and an FHA appraisal can cost $600. Why has the cost increased so much in such a short time?

Several factors are to blame, and we’ll examine them today and tomorrow.

– After the financial crisis, regulators decided that because a few loan officers at Washington Mutual Bank had leaned on appraisers to falsify values that all loan officers should be punished. (Reminds me of elementary school, but then again, so do a lot of things the government does.) As a result, appraisals now are ordered through an appraisal company middleman. And, of course, the middleman charges a fee.

Initially, the middlemen just took their fee from the appraiser’s fee, meaning appraisers received less. However, recent legislation required that appraisers receive their usual fee, so middleman fees forced appraisal prices to rise.

Tomorrow, we’ll examine a couple other factors and the effect these may have on the broader housing market.

Flood insurance surprise if you refinance

 Regulations, Residential Mortgage  Comments Off on Flood insurance surprise if you refinance
Jan 082016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

If your home is in a flood zone, and you have a mortgage, you need to be aware of regulatory changes that took effect on Jan 1st. The changes implement part of the Biggert-Waters Flood Insurance Reform Act of 2012 and require lenders to escrow flood insurance premiums for most new residential loans.

So, what does this mean for you? If you’re currently paying for flood insurance, and you refinance your home, at closing your lender will set up an escrow account, and you will pay the flood insurance premium as part of your monthly mortgage payment. The change applies even if you do not escrow for property taxes and hazard insurance. This likely will mean more money due at closing because when you escrow, you pay in advance of the bill coming due.

The new regulation has one interesting twist that may be appealing to homeowners who currently pay their own flood insurance premiums. As of Jan 1st, your loan servicer must give you the option to escrow flood insurance premiums. So, if you don’t like paying that flood insurance bill each year, the change allows you to spread the payments out as part of your monthly mortgage payment.

Government says no worries; your financial data is safe

 Regulations, Residential Mortgage  Comments Off on Government says no worries; your financial data is safe
Nov 072015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

I’ve never considered myself much of a conspiracy nut, but the government’s latest data gathering plan has me concerned for my privacy. As part of the Consumer Financial Protection Bureau’s crusade to discover housing discrimination (even where it doesn’t exist), it will start collecting far more intrusive data about every mortgage, including your income and credit score.

Do you really trust the government with your information? This is the same government that had data breaches at the Office of Personnel Management, the State Dept, the Defense Dept, the IRS, the Federal Reserve – the list goes on. Why in the world would I be comfortable with the CFPB holding this data?

What’s more, do you really trust the government to behave? Think the IRS might want to look the income you reported to your lender?

This seems to be a done deal at this point unless Congress steps in. Fortunately, the data collection doesn’t start until 2018, so we have a chance. However, if the rule doesn’t change, the only way to avoid the government collecting your sensitive information is to pay cash for your home.

Congress proposes easing flood insurance rate hikes

 Regulations, Residential Mortgage  Comments Off on Congress proposes easing flood insurance rate hikes
Aug 022015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The House of Rep is considering the Flood Insurance Fairness Act of 2015, which expands on last year’s changes to the flood insurance program by providing rate relief for second homes and rental properties. The intent is to allow these homes to receive the same flood insurance premiums as primary residences. While those who experienced the rate shock last year are probably cheering, I question whether this puts the solvency of the program at risk again. The House has a companion bill, the Flood Insurance Market Parity and Modernization Act, which is supposed to address the solvency issue. I’ll update you as I hear more about how these bills will affect both the program and premiums.

Regardless of the outcome of this legislation, one important change to the program already is in effect. Outbuildings that lie in the flood plain no longer result in a flood zone designation for the entire property. The outbuilding must be detached from the primary residential structure and cannot serve a residential purpose, such as sleeping, bathroom, or kitchen facilities.

Protecting military from foreclosure

 Regulations, Residential Mortgage  Comments Off on Protecting military from foreclosure
Feb 252015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Those fighting for our country need to know the Servicemembers’ Civil Relief Act (SCRA). This law provides some important financial protections for our military.

One of those protections was set to expire at the end of last year, but Congress extended it to make it permanent. The measure prohibits lenders from foreclosing for one year following the servicemember’s return from active duty. The measure is particularly important to reservists and National Guard members who have to give up full-time jobs to honor their commitments to our country. One important point: The service member must have taken out the mortgage prior to starting active duty.

I’ve provided a link to information about the Act at the end of my blog.

Click here to visit the the Veteran’s Administration’s Web page about the SCRA.

New mortgage rules cost you money

 Regulations, Residential Mortgage  Comments Off on New mortgage rules cost you money
Nov 262014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

I read an interesting article the other day that claimed that all the new mortgage regulations have saved you money. Feeling richer? What a bunch of bull.

Every honest analysis I’ve read about the effects of the new regulations, and by honest I mean ones that aren’t poorly disguised advertisements like this one I read, shows the regulations have increased costs by 30 to 50 percent. Sure, as the article states, you can get a no-closing-cost mortgage now, but you could do that before the regulations went into effect. And do you really think everyone loves you so much they’re all working for free? All those costs, those higher closing costs, are getting built into your interest rate. I recently read a report that estimated the regulations have added as much as 0.5% to the interest rate of every mortgage. Over the life of a $200,000 loan, that means you’re paying an extra $20k because of the new regulations.

Now, I’m not suggesting we overlook the excesses of the last decade, but I am calling bull**** for what it is. Maybe it’s time we become more careful about the excesses of regulation.