Points of Interest ©

...regulators created the Home Valuation Code of Conduct (HVCC) and reformulated the Real Estate Settlement Procedures Act (RESPA) with a new and updated Regulation Z.

Both of these new regulations are creating vastly more problems for consumers than any additional protection they afford.

The HVCC, which arose out of an agreement reached between Andrew Cuomo, the Attorney General of New York, the Office of Federal Housing Enterprise Oversight (OFHEO), and Fannie Mae and Freddie Mac is severely hurting our housing industry, the consumer and our economy.  We've discussed the HVCC in past articles here.  An excellent example of the failure of implementation to achieve the initial desire.

Calling your attention to the new Good Faith Estimate (GFE), a mandated component of Reg z, there is one item conspicuously missing.  You'll remember that this form is where all of your costs and expenses for your contemplated transaction were listed as an estimate.  Now the form has grown to three pages. (Yours truly was at a settlement last week where the third page was never shown to the borrower by the title company - a violation of RESPA?).

There are many interesting and questionable consumer friendly changes in the form.  But, the one that screams out at us and the one we will call your attention to today is the elimination of a signature line for the borrower.

You see, there was always a signature line on the old GFE.  In addition to their signature the borrower was also asked to date the form when acknowledging their receipt of the information contained within the estimate.  Not any more...

In fact, there are currently lenders out there that will reject your loan application if you have signed the bottom of the GFE.  Insane?  Yes, but this is mortgage lending 2010.

A curious note here.  Even the new, revised Good Faith Estimate at one time had a signature line.  When installing our processing software with the new updated forms the initial update had a signature line for the borrower.  This was before going out on the web as instructed and downloading a patch which eliminated it.

How does this affect you the borrower, you the consumer?  Any originator of a loan can provide you, the borrower with one good faith estimate and another completely different one can be given to compliance and eventually the underwriter.  No one can tell which GFE was actually given to the borrower.  This ability completely undermines the basis for the change in the form in the first place: improving disclosure of the loan terms and closing costs consumers pay when they buy or refinance their home.  The door has been opened for more mortgage shenanigans.

In announcing HUD's final changes to the regulatory requirements of the Real Estate Settlement Procedures Act (RESPA) in November, 2008, HUD Secretary Steve Preston said,
"Consumers need and deserve to know what they're getting themselves into before they sign on the dotted line."

Unfortunately, the dotted line doesn't exist any longer, at least not on your Good Faith Estimate.

Edward Gramlich, a Fed Governor from 1997 to 2005, proposed that the Fed use its bank holding company authority to examine subprime lending subsidiaries.  The proposal was opposed by then Chairman Alan Greenspan, he said, and never went to the Board of Governors.  Gramlich died in September 2007.  Greenspan in the past has declined to comment.