The Changes in the mortgage industry on April 1, 2011 are going to be overwhelming. It is going to be the good, the bad, and the ugly. But overall, I do see the positive aspects in the changes that will happen on that day. The biggest thing is that everyone is going to have to do it. Where rules and laws in the past have subjected only limited amounts of the industry, at least what can be seen so far of these changes should affect everyone in the industry.
There are aspects of the April 1 Frank Dodd Act that I feel will be good in the long run. A lot of people argue with the Safe Harbor Act portion, which states that it is our duty and our job to put the individual in the loan or the best option for them. There are a lot of people who say that hindsight is 20/20 when you look after the fact, for example, If certain individuals who took out a 7-year ARM and then decided to stay in the house longer than seven years, which they had not originally intended when they first moved, their situation appears worse than if they had sold as originally planned…or if they did a 30-year FHA loan when possibly they should have done a different type of loan to fit their needs.
In my industry, what I see in the bill is positive. Everyday I come across people who are Veterans, that in some cases have service-connected disability benefits, and they are pushed in or roped into a loan that does not fit their needs. From my perspective, that should never happen again. If you do have your VA eligibility, and in some cases have disability through the VA, there is no reason and hopefully no time in the future that anyone will ever do a non-VA loan for you. So some parts of the bill I can see as benefits.
Most of the changes, however, will be in accounting and pay structures. The intent of this bill was to have the consumer have less in cost, but I don’t think that will be successful. For example, right now, a year plus into the effects of the changes in RESPA that were instituted back in January 1, 2010, you can see that the individual borrower is actually paying more in cost than what they were prior to that event due to bank logistics and the individual companies involved that have to offset their expense to facilitate the law. I feel the same thing is going to happen on April 1. While the intent of the law is to lower the cost to the consumer and enable them to make more free choices, actually, in the end, it’s going to make it more expensive for them because businesses pass that expense on to the consumer. That is the one negative that will come out of this bill. Overcharging is still going to exist. It is not going to go away. It is going to be a shell game on how banks or how brokerages or how mortgage bankers will pay the individual loan officers. That’s just my opinion on what the law is going to effect, and I look forward to that date to find out exactly what is going to happen.