HERA or the Housing and Economic Recovery Act was passed by Congress and the Federal Reserve Board, along with countless other policies and regulations to make the lending industry a safer place for the consumer and the overall economy.
I'm not complaining - I'm JUST SAYING...
There are new disclosure policies with regard to TIL (Truth in Lending Disclosure) and minimum business days required prior to closing.
I would be one of the many to say that some of these policies are bit overkill, but I get it.
Is it a case of "too little too late" along with over-reacting with policies? You be the judge - but I get it.
Check out this presentation video I did for my customer on the new HERA Policies taking place July 30th, 2009. These could significantly add days to the already lengthy lending process on top of HVCC Policies we also have to adhere to with regard to appraisals - BUT I GET IT!
Let me talk about the new re-disclosure policies and minimum business days: this made sense for the people selling 1% and 2% Option ARMS to consumers who charged points up front, tacked on a 3 year prepay to the loan and made insorbent yield spreads in the back - THE HERA POLICY and talks of taking away the ability of Mortgage Brokers getting YIELD SPREADS because of abusive practices. I GET IT!
But to take away YSP's now when all the loans being closed are FHA, VA and Conventional with very tiny margins.
I GET IT. I agree with these policies and more than adhere and educate my customers on them but they're too late with them and they're being applied to the wrong times and wrong programs.
We're trying to get ourselves out of this crazy housing/mortgage mess we got ourselves in and just about every transaction i work on now are all purchases (i've closed 1 refinance in the last 3 months). a guest on CNBC the other day mentioned, "we have an over-supply of great, qualified borrowers making offers on homes - the problem is there is a huge shortage of supply of homes available to go around..."
really? this is a good and a bad thing. good in a sense that yes (and i'm seeing them, too) there are a lot of good qualified buyers making offers on houses listed for sale. from what i hear, there are 12 offers on average per listing (i'm in Northern California). this is great!!!
(1) people are taking advantage of the rock bottom prices of homes - most cases the monthly payments would come out to about the same if not a few hundred dollars different a month for what they're paying now in rent.
(2) these are GOOD BORROWERS prequalified and making offers to buy a home - meaning with the new group of homeowners getting into homes right now - if you're able to get approved and funded with all the hoops you have to jump through before the guidelines change on you - you deserve to own the home and are setting a good foundation of healthy and strong homebuyers in America!
(3) the $8,000 tax credit offered to homebuyers this year.
bad news? not enough listed homes to go around. how did this happen??? wasn't it just a year ago and earlier this year we were getting on the home builders who were still building homes and the massive number of inventories of homes just sitting around not getting sold? not to mention foreclosures that haven't hit the market yet and the huge number of delinquencies going into foreclosures that haven't hit the market but soon will.
here's some theories...
(1) Short Sales and REO Process. not sure if you've ever dealt with these guys on a purchase transaction, but i think this is a huge reason for the bottle neck of getting these homes listed out of the market.
so imagine 12 offers per listing. the bank owned properties or short sale folks will take up to 3 months to decide on which offer to go with, the agreed purchase price and other details (credits to buyer, repairs, contingencies, etc.) in the purchase contract and they only give the buyer about 3 weeks to a month to close a loan because the bank has to "get this property and loss off their books..."
guess what?
(1) with the HVCC policy, it's taking about a week or a week and a half for the appraisal (assuming there are no hiccups with the quality of work done on it).
(2) with the new HERA Compliance Policies, you're looking at probably 45 days to close a loan now (as oppose to about 30 or less pre-HERA and assuming there are no hiccups with re-disclosing and added business days because of it).
so are we talking close to 60 days to close a loan now?
look, i'm not trying to present a doom and gloom. i'm not focusing on the negative. i wish there was a better more streamlined way or policies to help get this foreclosure market off so that our economy can finally be up and running!
if you're thinking of buying and you qualify to buy, BUY NOW!!! the $8,000 tax credit is only good through December of this year. i know you're thinking - it's only August, i've got time.
NO YOU DON'T!!! with the amount of time it will now take to close your loan (60 days?). then if you're dealing with an REO or Short Sale Bank - tack on another 2 to 3 months before the 60 days to close your loan. then before you even get into any of the 1st two i just mentioned, there's the whole HOUSE SHOPPING aspect of it. i've seen people take 3 to 6 months to finally find that house they're looking for.
listen, i know a lot of people want their first house to be perfect but i will tell you, for a lot of people it's not. most people work their way up over time. get into a house now because you'd be paying the same for rent, you've got tax write-off benefits as oppose to not having it as a renter, you own the place so you can decorate and paint it how you want it and you'd be helping the economy. i'm only saying to hurry now because there's no telling what we have in stored for 2010.
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