For this issue’s Ask a Lender column, Brian Jessen, senior vice president of Guaranteed Rate, answers questions posed by Chicagoland Realtors.
Q: Tell me what is happening with the jumbo mortgage market lately. Is it getting any better?
A: Frankly, it is getting significantly better as far as finding more and more lenders interested in the jumbo mortgage business. Since I have operated a majority of my business in this arena for the past 20-plus years, I keep a close eye on what is happening in the higher end market. As a national lender, we can see the changes across the country.
Loan to values that lenders are comfortable with are improving, and there are less declining market appraisals. Every quarter, more lenders are jumping back into the jumbo mortgage market, some very aggressively, while others are just dipping their toes into the water. Two to three years ago there might have been only two or three jumbo lenders across the country, and currently there are typically three to four times that many bidding for business. The corner for the jumbo lending marketplace is turning positive, albeit at a slower pace and in a more cautious manner.
Q: Can you summarize some of the major changes in consumer laws for lenders and title companies?
A: There are many recent changes for lenders and title companies in 2010. Below is a summary of the most important changes that may affect your purchase/sale transactions.
1. Good Funds Statute: This relates to title companies and how they accept client funds for their purchases and refinances in Illinois. Basically, if the client has to bring closing funds of $50,000 or greater to the title company, the clients should wire their funds into the escrow account that has been established for their transaction. Also, clients are allowed to bring a check from a sale transaction held at a title company to be used at their purchase transaction, as part or all of their required funds.
If the amount to be brought in is between $5,000 and $50,000, they may wire the funds to the title company or they may bring a cashier’s check. If the amount is $5,000 or less ($1,000 or less is preferred), a personal check may be accepted by the title company, at their discretion.
2. RESPA Reform: The intention of this law was to “simplify” the fees and costs to clients so that they could shop around for the best lending and title packages. In reality, it has caused confusion and frustration for everyone. Things will get better over time, but for now expect longer closing times as a result of these new regulations.
3. Mortgage Disclosure Improvement Act (MDIA): Like RESPA reform above, the MDIA was created in the spirit of protecting consumers by preventing deceptive lending practices and making consumers more informed about their options. Key new rules include:
• The closing date of purchase or refinance must be at least seven business days after the date the lender disclosures are sent to the borrower, for primary residences or for second homes. They can sign on the seventh day or after.
• For the lender, if the annual percentage rate (APR) on the loan varies by more than 1/8 percent (.125 percent), for the most current client disclosures, MDIA requires the lenders to send out updated disclosures at least three business days prior to the closing. Written verification of receipt of the new disclosures by the client has to be in their loan file. The APR on a mortgage loan can be affected by the loan size, the interest rate, loan program selection and fees.
• Property appraisals have to be ordered by the lender through an independent appraisal department within their firm or by a third party appraisal management company. The lending officer cannot contact the appraiser directly. Also, the borrower must receive a copy of the appraisal report at least three business days prior to the closing.
Q: What do all of these new regulations mean to me and to my clients as a Realtor?
A: Learn the basics of the new laws and rules as best as you can through educational outlets. Try and set realistic expectations with your clients as to how smoothly and quickly the process should go for them, given all of the new challenges.
More than ever, you should rely on a core group of experienced professionals (lenders, attorneys, title company agents, etc.) that take ownership of their profession and possess the knowledge that will help, not hinder, the process of getting your real estate transactions completed!
Brian Jessen, senior vice president of Guaranteed Rate, Inc., has 24 years of experience with banking and lending. He can be reached at email@example.com, or at 847.712.0830.