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Government Regulation Clogs the Pipes

by Zac Ellerbroek

It's no secret that many facets of lending and real estate have changed as a result of the credit crisis. In addition to tightened lending practices that resulted from rising mortgage delinquencies, Washington has been heavily involved in altering the way lenders do business today.
Two individual pieces of legislation impacting our business need to be taken into account when determining closing dates for purchase transactions.

Home Valuation Code of Conduct – The Home Valuation Code of Conduct (HVCC) went into effect May 1, 2009. Intended to shield appraisers from undue influence from loan officers and lenders, this legislation installed a "firewall" between those individuals directly involved in the origination of the loan from the selection of and contact with appraisers.
HVCC also requires that borrowers receive a copy of the appraisal a minimum of three days in advance of closing. Part of the kicker here is that "received" is considered, in effect, three business days after the appraisal has been mailed to the borrower. As HVCC requires a firewall between the originator and the appraiser, the time to receive an appraisal has increased, in some cases by as much as two weeks or more. While this may not always be the case, it is important to take into consideration when considering closing dates. Today, conservative closing dates are mandatory to properly manage expectations of all parties.

Housing and Economic Recovery Act – The Housing and Economic Recovery Act (HERA) amends and impacts several aspects of obtaining a mortgage, the disclosures required for borrowers, and the timing of their delivery. This impacts the minimum time required to close, and should any changes be made to a loan application that could impact the Annual Percentage Rate (APR), this could impact the closing date.
Other than paying for a credit report, lenders may not accept any additional fees from a borrower until four business days after disclosures have been provided to or mailed to a borrower. This has the potential to delay several aspects of the application process.
Finally, upon making application, a borrower is provided a Truth in Lending (TIL) statement, detailing the total expected costs that could be incurred over the life of the loan. Should anything change in the loan application that could change the APR by more than .125%, a new TIL must be reissued to the borrower a minimum of 3 business days before closing. Items impacting the APR could include a borrower accepting a higher interest rate than initially qualified by floating their rate at application, a change to the loan amount, a change in product, a change in closing date, and any changes to fees.

I always get the Good Faith Estimate as close as possible by using the Access Kent web-site for property taxes and only charge my accurate 3rd party fees which are always the same. With this there are no dramatic changes in the APR.

What Now? – While there is more we can discuss on the specifics of these legislative implications, I felt it important enough to let you know now that I would not recommend you write purchase contracts with short closing time frames. I suggest 45 day purchase agreements for all FHA and Conventional Loans, and 60 days (if possible) for Rural Development loans, as Rural Development is 7-8 business days on their own turnaround times.

I would rather under-promise and over-deliver in these economic times.

-Zac Ellerbroek

Take a Walk on the Supply Side

by Mark Brace

In the spirit of Independence Day I'm sharing an article taken directly from the Wall Street Journal and sharing it:

Sometimes, simple ides are the best ideas, said Stephen Moore in the Wall Street Jounral. Take supply-side economics, which holds that tax cuts ultimately boost economic activity and lead to more tax revenue, not less. Ronald Reagan was the first to take the supply-side plunge, and was vindicated. He slashed the highest personal income tax rate to 28 percent from a "confiscatory" 70 percent. The result? An economic boom that doubled federal tax receipts. Now we have "overpowering confirming evidence" that the first time was not a fluke. In 2003, President Bush cut taxes on dividends to 15 percent from 39.6 percent, and on capital gains to 15 percent from 20 percent. As a result federal tax revenues have surged by 15.4 percent in the first 8 months of fiscal 2005 over the same period in 2004. Federal, State, and City deficits were shrinking, and some states were building surpluses. The controling power now is insisting "we can't afford" to make the bush tax cuts permanent. In Fact, the evidence points to the opposite conclusion: "We can't afford not to make the tax cuts permanent."

In Conclusion: Both times in Recent History when we lowered taxes the Government collect more money!

 

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Contact Information

Mark Brace, Realtor, ABR, GRI, CRS, SRES, e-PRO, A
Berkshire Hathaway HomeServices Michigan Real Estate
3000 East Beltline NE
Grand Rapids MI 49525
Direct: (616) 447-7025
Cell: (616) 540-7705
Fax: (616) 447-7025

Berkshire Hathaway HomeServices - Michigan Real Estate is a full service, locally operated real estate brokerage company backed by the strength of a solid national and global brand. Our full service businesses include Residential, Commercial, Relocation, Mortgage, Insurance, Home Services and New Homes & Land. Our core values, service philosophy, cutting edge technology, and most importantly our people are what make us the leading real estate company in Michigan. We are committed to providing the highest quality real estate services possible and making each customer's experience one that surpasses their expectations.