Editor’s note: On April 14, 2015, the U.S House of Representatives passed H.R. 685, “The Mortgage Choice Act” by a vote of 287-140. The Power Broker Roundtable is brought to you by the National Association of REALTORS®. Watch for this column each month.
Moderator:
James Imhoff, Chairman & CEO, First Weber Group, Madison, Wisc.; Liaison for Large Firms Relations, NAR
Panelists:
Dan Forsman, President/CEO, Berkshire Hathaway Home Services Georgia Properties
Joe Clement, Broker/Owner, RE/MAX Properties, Colorado Springs, Colo.
Candace Adams, President/CEO, Berkshire Hathaway Home Services New England Properties, Wallingford, Conn.
Jim Imhoff: Just over a month ago, with the strong support of NAR and coalition partners, the House Financial Services Committee passed H.R. 685, “The Mortgage Choice Act.” H.R. 685 addresses discrimination against lenders with affiliates under the Qualified Mortgage (QM) rule’s 3 percent cap on fees and points. Under the current rules, consumers who would like to use a real estate affiliated lender may not qualify for a QM mortgage and have to go another lender or not use the providers of their choice. This legislation levels the playing field and fixes that issue. The legislation is expected to come before the full House of Representatives soon. At the same time, certain RESPA/TILA (Real Estate Settlement Procedures Act and the Truth in Lending Act) changes proposed by the Consumer Financial Protection Bureau (CPFB) are poised to take effect August 1—changes that impact the settlement process and will require some REALTOR® readiness. So today, we’ve invited a panel of seasoned professionals to get their take on how these issues will affect us all as brokers and agents. Dan, where would you like to start?
Dan Forsman: With regard to the changes coming in August, let me start by recognizing that the changes are a little less dramatic than they might have been, thanks to NAR’s input to the CPFB. Essentially what will happen is that two presently used forms, the ‘Good Faith Estimate’ and the ‘Truth in Lending’ disclosure, will be combined into a ‘Loan Estimate’ form—which has to be delivered within three days after certain information is collected. Also, the HUD-1 and final TILA is being replaced by the ‘Closing Disclosure’ form, or CD that has to be delivered to the consumer three days prior to closing. If there are any changes to be made during those three days, the closing could be delayed, so it behooves us—especially those with mortgage and title affiliates—to consistently deliver all the necessary documents way ahead of the curve.
Joe Clement: Yes, because stuff happens. If there are any hiccups, or certainly any substantive changes in the transaction—like unforeseen repairs that need to be made to a property—that could trigger a significant closing delay. That puts pressure on the smaller lenders and title companies, especially, to get everything done and the paperwork in a good week before the closing date—and they need to prepare their clients for this as well. But it’s a doable thing, and I see it as a good thing for consumers because it lays out everything for them, including exactly how much cash they will need to close.
Candace Adams: The Loan Estimate is definitely more user-friendly and probably easier to navigate. Also, it will also be less impactful to the agent directly though the agent has an important role to play in helping to ensure their clients have a good experience and close on time, and more impactful to the lenders, title and settlement companies, and attorneys, who need to be mindful of any possible last-minute glitches. But in general, if the operation runs smoothly and people get their paperwork in early; it shouldn’t upset the apple cart too much.
JC: It puts a crimp in the traditional 30-day closing in our area. You should figure a minimum of 45-60 days. A good rule of thumb, I think, is if you want to close on a given date, get everything ready at least a week ahead of time—and be prepared to add up to two weeks to the expected closing time, just for any contingencies that crop up.
DF: If you think about it, all this added efficiency in the way we handle data may help get us sooner to the truly paperless transaction.
JI: Maybe…What about changes to the QM Rule?
DF: As Candace pointed out, this primarily impacts companies with mortgage and title affiliates. The 3-percent cap imposed on those lenders prevents them from providing services to low and moderate income borrowers seeking mortgages in $200,000 and below range.
CA: H.R. 685 reduces the discrimination against these companies and gives consumers greater access to mortgage credit and more choices in their credit providers.
JI: NAR historically has looked out for consumers as well as brokers. Look at its role in other past RESPA/TILA changes. You can always see the latest on NAR’s positions on these issues at www.REALTOR.org/RESPA .
JC: If there’s one thing I’ve learned after 35 years in this business, it’s that any change causes some heartburn—but a change becomes the norm soon enough. It’s not the end of the world.
