Interest rates have declined today after a fab bond sale!

With the new disclosure requirements coming down end of July, the banks are reaching out to all parties involved with the mortgage closing to help out. Many states, do not require an attorney represent the borrowers/buyers in a transaction.. Some states use escrow companies to close for the bank. I am based in New York State where there are more attorneys than anybody else at the closing table.  We believe that everybody should have an attorney  represent them in a real estate transaction. Somebody has to be looking out for you! Here is just another reason why we cynical New Yorkers might be right. Below is a direct quote (from a bank memo received today) in a plea to the closing attorneys for assistance.

 As mentioned in my previous blog, on July 30, 2009, the new Housing and Economic Recovery Act (HERA) Mortgage Disclosure Improvement Act will begin requiring additional disclosures to the borrower. If not handled properly by all parties involved it could delay closings, lose rate locks and generally piss the borrower off. Whether there is a bank attorney involved or not, the borrower should know that somebody needs to be checking the following items:

The memo goes…….

“Most of the changes will be transparent to the consumer and real estate agent.  However, as a settlement agent, it is imperative you have a strong understanding of the requirements of the Act and how they impact the closing process for consumers. In particular, the areas where you can be of most help include:

 –Ensuring all fees impacting the APR are accurately communicated to the lender as soon as fees are identified.  Any increase in the APR of more than .125% will require a re-disclosure of the Truth in Lending (TIL) and could delay closing. The re-disclosure requires the consumer be given an additional three (3)-business-day review period prior to closing, after receipt. 

 –Providing a preliminary settlement statement with accurate fees to the lender, allowing the lender sufficient time to issue a revised TIL disclosure (if necessary) seven (7) business days prior to the scheduled closing date.

 –Scheduling signing/closing dates as accurately as possible in order to best estimate prepaid interest and avoid TIL re-disclosures.

 The point of the story is that people need to be checking and rechecking each other works. The extra layer of paperwork may create issues that only the borrower will suffer for. Be proactive, bother people!! It is your money.”

 Dale Siegel

The new government regulation requiring repeat and final disclosure of closing fees and Annual Percentage Rates could delay a closing if they are not handled properly by all parties.

In short, the documents must be received 3 days after lender receipt of the loan application as well as 7 days prior to closing. If the dated docs are not in the file, the loan will not close.  In light of the newness of this exercise, the lenders, loan officers, attorneys and borrowers must all pitch in to make sure the requirements are met!

A borrower can do the following things to help move the paperwork through the system:

• Open all mail that is received from the lender- don’t throw it out
• Read it- it does not make good bedtime reading unless you are having trouble falling asleep
• See if you need to sign anything- there will be little “sign here” tabs and X’s where you need to sign
• Send it back- typically a postage paid envelope is included

 Be aware of the following:

• Every time your loan terms change, you will receive new papers to sign (follow above)
• If you go to a different lender, you need to sign all of their forms
• Final disclosures cannot be sent out until you lock your interest rate in

 This means that once your rate is locked, the lender needs to process the paperwork and send it to you. You need to sign and return it to lender. Once in their file, seven days will count down to the closing.  To expedite this, I suggest we all utilize technology. Email it, print and sign, scan and email back. All in one day……..

 Dale Siegel

Getting a mortgage with no job is pretty much impossible now, but how does one get a job with spotty, or complicated,  employment history?

Most lenders want to see two years consistent work history as well as [now] a hope for continued employment in one’s job. Over the past few year, thousands of people in all industries and employment levels have been hitting the unemployment line. While waiting for the smoke to blow over, people have been doing all sorts of things such as going back to school, learning a different trade or starting a new career. When this bad economy turns around [and it will], how is one to get a mortgage with unusually employment history?

 The key is to keep a record of employment and pay history. The lenders will always want to see two years history, but they will have to allow spotty history.  Below are three scenarios of American’s current job affairs:

1. Unemployed/Gap in employment: if one is unemployed and collecting unemployment compensation, this may count as income. However, can we view it as part of one’s job history? I think not. If a person is let’s say an engineer who was laid off in March of 2009 and remained unemployed until March of 2010. In March of 2010, that person was lucky enough to land another job as an engineer, in a completely different industry, but with the same pay scale. In order to apply for a mortgage, the person would need to show the previous job, explain the gap as looking for a job and document the new job and salary. The issue is the long period of employment, which is explained by the state of the economy. The plus would be the new job in the same industry. I would suggest having the new job for several months before applying for a mortgage.

2. Education: Many people have taken the twist to go back to college or trade school to either pick up their current skills or learn a new set. If there is a gap where a person takes the time to educate themselves, this could count as “employment” time in the eyes of the lender. If the engineer went back to school to become an accountant, and takes a job working at an accounting firm, well that would look good. The new job should have a history of at least 12 months. The lender will add the education and 12 months work history together to meet the two year employment requirement and will be ok with the change in careers. The fact that they changed career is ok, if the new career is stable; not as if he joined the circus. The lender will look at the old job, education and potential for continued employment in the new profession.

3. Self employed/consultant: If one loses their salaried job and decides to make a go of it as a consultant, this is more difficult. It is preferable to consult in the same industry as you worked in. Proving that you had stolen many of your clients from your old boss which is why you will be able to make a go of it, is a plus. However, if you switch industries and begin consulting circus layouts, well the risk might be greater there. There is typically three years history required for the self employed, however less is fine if it is in the same industry as before. Two years with tax returns, an increasing cash flow and proof of future business and stability is required. The lender will look at industry, education and potential for future income.

The key will be the stability of the new job, not how much time you were unemployed in between. The banks will have to look at employment with a greater eye in the future. Compensating factors such as education and new job stability will be weighted more than time on the job. Just remember, you are not alone!

Dale Siegel