Just a few years ago (before 2008) mortgage brokers were touting unreasonably quick closings. The result was many community banks lost the opportunity to serve their clients, and their clients went to someone who really didn’t care about them. No matter how quick some lenders could close (remember no doc loans?) the community bank still needed to have due diligence to protect all concerned.
New Mortgage Rules make it tougher for some Lenders, but for Community Banks it’s ‘business as usual’.
On January 10 the Consumer Financial Protection Bureau (CFPB) set new rules intended to prevent the same risky lending practices that led to the housing crash. Borrowers will have stricter standards for debt-to-income ratios, FICO credit scores, residual income analysis, and more reserves for those loans classified as “nonqualified”. It is likely that lenders will make fewer exceptions with the new rules.
The CFPB’s goal makes sense: restrict mortgages that borrowers can’t afford. The standards are listed in the CFPB’s Ability-to-Repay and Qualified Mortgage Rule. The Ability-to-Repay standard bans no-documentation loans and requires lenders to verify and document a borrower’s income, assets, savings and debt.
This means if they have found an appraiser providing inferior work the lender is not to utilize these appraisers for Fannie loans. Sounds OK, but they only have four appraisers on their list, for the entire United States! It’s a small beginning, but it’s sure to grow as Fannie searches through its database for appraisers who have repeatedly provided inferior work.
On a regular basis SAMCO reviews individual State Appraiser Board Disciplinary Actions. We will now be doing this with Fannie also. In the past some ‘bad apples’ have tainted our profession. But with every passing year, the professionalism of our appraisal industry is growing. It’s great to be part of it.
When the 2010 Interagency Appraisal and Evaluation Guidelines were printed in December of 2010 there were many new requirements and a restating of many old ones.
Section VIII Minimum Appraisal Standards at the top of Page 9 of 45 states:
SAMCO’s clients disclose appraisal costs in two different ways on the Good Faith Estimate and initial Truth in Lending Disclosure (both being replaced by the new CFPB Loan Estimate in August 2015). The first is to total both the appraisal management fee and appraisal fee into one total cost. The second is to separate and identify the two individual fees to the consumer.
It’s a Wrap for 2013!
And it’s not just a New Year, but an opportunity for a New, Smarter and Easier Way!
Change can happen slowly or quickly. With banking regulations, it tends to be on the slower side. Take for example the 2010 Interagency Appraisal and Evaluation Guidelines. They were finalized and announced in December 2010, but there has been so much turmoil in the finance world the past years that examination teams are just now starting to make these changes part of their examination process! That’s slow!!
A great Article on Local Bankers and the outlook for their future!
Do you feel like you’re being buried under not just new regulations, but the paperwork that accompanies it? When it comes to compliant appraisal policies and procedures many community bank lenders believe they are compliant now, or at the least, believe they know what to do to become compliant. But so many regulations have changed that touching all the bases can be difficult. The Consumer Financial Protection Bureau (CFPB) is moving towards enforcement and oversight, and penalties that will make everyone take notice.
One of the many regulations that the CFPB is charged to oversee is the Equal Credit Opportunity Act (ECOA). One existing ECOA appraisal rule is:
Every day regulatory agencies are spitting out new regulations for community banks. And it will only become more challenging as Dodd-Frank and the CFPB swing into full regulatory mode and as the other agencies (Federal Reserve, FDIC, OCC, NCUA) play ‘catch up’ with training on these new regulations. Lenders are being constantly challenged to find new and better ways to serve their community within these new compliance issues, while maintaining profit.