A New Sheriff Has Come to Town!!

And he is about to make your home buying and selling experience much more difficult. As of August 1st 2015 the federal government, through its regulations under the RESPA/TILA laws governing real estate mortgages, is making some major changes in the way real estate transactions are closed if they have any kind of mortgage needed to close. These changes are being dictated by a relatively new federal agency, The Consumer Financial Protection Bureau, which was established as a result of the Dodd Frank Act. The purpose of this act, the new bureau and the new regulations was to protect consumers from unscrupulous lenders and/or practices and to hopefully insure that consumers understood better the mortgage product they were obtaining and the costs associated with them. Although the intentions were good, you know what the road to hell is paved with! There are going to be very strict guidelines on disclosures in the lending process and the timelines involved with those disclosures. The result is that, in order to be in compliance, mortgage companies and title companies (which normally close these transactions) are totally having to revamp their systems, forms and procedures. The changes are too complicated to detail here, but the inevitable result is going to be longer periods from the time you agree to buy a home to the time it can close. lt is also going to cause some major delays in closings, if anything purposely or unintentionally changes in the terms of the mortgage, even if that change benefits the consumer financially. It can still cause the closing not to happen on time. Because many of the people buying a home are also selling a home, a delay in one closing can cause delays in another or possibly several other closings that are dependent on the first one. The people involved in the subsequent closings, the consumers and the professionals, will not have any control over the elements of the first closing, yet can and will be significantly affected. We are expecting this phenomenon to be somewhat common after August 1st.

For consumers I believe some factors in their decision making are going to be more important than ever:

1) Choose a lender of the highest reputation. Only work with a loan officer who is very experienced and will meet personally with you. There are many loan officers and internet companies selling mortgages only over the internet. You never meet with them. ln my opinion, that is always going to be a questionable mortgage with questionable service. Particularly after August 1st of this year, you want a loan officer with a very deep knowledge of the process and who will stay on top of your loan. I have heard predictions that many mortgage companies may go out of business because of the complexities of the new requirements. What happens if your loan is in process with that mortgage broker, who does go out of business­
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2) Choose a title company also of the highest repute. Don't choose a title company based on price. These are the people who have to administer all the regulations. lf you have a good solid Realtor, rely on his recommendation. Otherwise, research the company very well. I would always recommend a locally owned company whose title policies are underwritten by a large major insurance company.

3) Which brings me to my third recommendation; choose your agent very carefully. I highly recommend that you choose an agent who has a great deal of experience and is known for keeping up with the legal and regulatory areas of real estate. I would only hire a full time Realtor who has committed their full efforts to the practice of real estate. After August 1't this will be more important than ever.

Finally, let me say, that even if you have chosen wisely, and all the pros do their jobs exceptionally well, delays still may happen. This is due to the fact that your agent, your loan officer and your title professional cannot control the transactions which precede yours in a chain of closings. Although well intentioned, these new regulations are going to cause serious problems for some consumers. By choosing your professionals based on the level of their competence, experience and service, you can lessen the chance for the problems I have described. Also, I have posted on my web site, mnhomesbydave.com, an article from Rismedia.com and the National Association of Realtors which can more fully explain the changes. lt is under the Real Estate News tab. Thanks for reading.

David Feerhusen

David Feerhusen

Broker/Realtor, CDPE, GRI, CRB
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