As published in Scotsman Guide's Residential Edition, July 2011.
After a year of anticipation, the Consumer Financial Protection Bureau (CFPB) takes the reins later this month. And although it hasn’t officially been in charge, the bureau has been paving the way for numerous changes mandated by the Dodd-Frank Act these past few months.
This past May, the bureau put two draft mortgage-disclosure forms up for industry and consumer comment at its website, consumerfinance.gov/knowbeforeyouowe. The goal is to combine the good-faith estimate and Truth in Lending disclosure into one clear, concise form. In this month’s FinePrint column, columnist Richard Smith discusses the industry’s response to these draft disclosure forms.
It’s important for mortgage originators to make their voices and opinions heard, and by requesting comments on the draft disclosure forms this past May, the CFPB indicated that it welcomes these opinions. After all, mortgage originators are on the front lines with the consumers who the revised form intends to benefit.
In addition to ensuring that clients understand what fees and terms are associated with their mortgage, it’s also more important than ever for originators to ensure borrowers will qualify for a loan from the outset. Lenders’ underwriting guidelines have changed dramatically, and underwriters may be less forgiving of errors or omissions in loan applications.
This month’s Scotsman Guide tackles some underwriting issues you may face and offers tips for ensuring you have all your bases covered when it comes to your clients’ loan applications. Professional Mortgage Consulting’s Rich Leffler offers five tips for making loan applications underwriter-friendly. And Scott M. Cole of Clearwater Mortgage emphasizes the importance of five C’s — credit, capital, capacity, collateral and compliance — in helping avoid underwriting pitfalls.
As part of the underwriting process, lenders will examine borrowers’ home-insurance policies. As evidenced by recent events in the South and the Midwest, it’s important to know whether your client lives in a flood zone — and to know how flood-map and related insurance changes affect their policies. Greg Holmes from Credit Plus Inc. discusses the Federal Emergency Management Agency’s map modernization revisions and notification requirements here.
With a new mortgage-industry regulator taking charge and overseeing everything from loan origination through loan servicing, it’s a good idea to stay on top of any changes and continue to advocate for your clients’ best interests.