Can it be possible?
The government has opened the door for uncontrolled bilking of Mortgage Companies?
I will be the first person to admit that I don’t understand all the changes that have occurred in the mortgage industry. I go to classes. I listen. It will take awhile for it all to sink in. It is no wonder that the number one thing buyers don’t understand is the lending process.
I do this for a living and can’t get my mind around it anymore.
From what I understand, the Good Faith Estimate that lenders must provide potential borrowers has gone from non-functional to convoluted and non-functional. The old GFE did not provide all the data needed to compare loans in an apple to apple fashion. The new one does a better job, it just does it in a language that no one other than a regulator understands.
OK, I get that much. Now, in order to give a GFE, the lender has to have 6 pieces of information. If he does not have that information, he can send out a SWAG (sophisticated wild ass guess) regarding the loan. Lots of lenders are using the old GFE to send out the non-binding information.
Here’s a cracker jack idea. We won’t have the consumer sign the new GFE!
Well, that certainly adds a certain amount of “what were they thinking” to the equation. So, let’s just move on. You see, the GFE must be pretty close to the new HUD-1. Now, it really gets interesting. The feds have set up tolerances that leave minute variances to exist between the GFE and new HUD-1. If they are off by more than the allowance…can I get a little drum roll?
the Lender has to pay the difference. So, I’m thinking…what pea brain thought this system was fair and would correct all that ills the system. There is so much wrong, they can’t make it right.
Here is a hypothetical that keeps all lenders up at night. The owner of a title company discovers that he or she is short cash or maybe, they just want to retire. They look at the books and see they have 100 transactions closing at the end of the month. They think…hmmmmm…and decide to bump their fees by $500 dollars for each transaction. They add it on the brand spanking new HUD-1 for each closing.
The buyers show up and say, that was not on my GFE, I am not paying it. The lender scrambles through his paperwork and says but that is not what you told me. The title folks shrug their shoulders. Oh, then they collect the extra $500 from the lender on each transaction. When the proverbial poop hits the fan, they will be in Bermuda, sucking down a pina colada with $50,000 in their pocket. Sound crazy, well that is the way the new regulations read.
Sometimes the government is so damn dumb it just boggles my mind.