Part II of a Three Part Series

In Series Number One, we reviewed the merits of the Good Faith Estimate and its value to the borrower for transparent disclosure of facts and figures.     In the Part Two, we need to address the “service” aspect of the Real Estate Settlement Procedures Act.

When you apply for a home mortgage, you may think that the lender, or loan originator, will service the loan until it is paid off or your house is sold. However, in today’s market mortgage, servicing rights often are bought and sold. The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute which affords you certain disclosures and strategies for problem resolution with your mortgage and/or escrow account.

Duty of Loan Servicer to Respond to Complaints. If you have questions or problems with the servicing of your loan, the servicer is required to respond to you. Write to your servicer and call it a “qualified written request under Section 6 of RESPA.” It should be a separate letter and not mailed with your payment. The mortgage servicer must                respond to you within 60 business days of receipt.

A Sample Complaint Letter would include the following because the specifics are important:
Attention Customer Service:

Subject: [Your loan number]
[Names on loan documents]
[Property and/or mailing address]

This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing because:

• Describe the issue or the question you have and/or what action you believe the lender should take.
• Attach copies of any related written materials.
• Describe any conversations with customer service regarding the issue and to whom you spoke.
• Describe any previous steps you have taken or attempts to resolve the issue.
• List a day time telephone number in case a customer service representative wishes to contact you.
• I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

Sincerely,

[Your name]

REMEMBER: This letter SHOULD NOT be included with your mortgage payment, but should be sent separately to the customer service address.

And, it is very important that you continue to make the required mortgage and escrow payment until the request is resolved.

Loan Transferred to New Servicer. Your loan servicer is required to notify you in writing at least 15 days before the servicing of your loan is transferred to a new servicer. The notice must include the following information:

* The effective date of the transfer, the date your current servicer will stop accepting payments and the date the new servicer will begin accepting them.
* The name, address, and toll-free or collect call telephone number for the new servicer.
* Information that tells whether you can continue any optional insurance, such as mortgage life or disability insurance, and what action, if any, you must take to maintain coverage.
* A statement that the transfer of servicing does not affect any term or condition of your mortgage documents other than the terms directly related to the servicing of the loan.

Treatment of Payments During Transfer Period. During the 60-day period beginning on the effective date of the transfer, the payment may not be treated as late if you mistakenly send it to the old mortgage servicer instead of the new one.

Escrow Account. RESPA does not require that you maintain an escrow account for the purpose of paying property taxes, hazard insurance, etc. Nor does RESPA have any jurisdiction over the decision of the lender or servicer to require or terminate an escrow account. RESPA does, however, provide you with the following protections with regard to the escrow account:

• If your lender or mortgage servicer requires you to maintain an escrow account for the purpose of paying property taxes, hazard insurance, etc., RESPA requires that the servicer pay such items by the dates due to avoid a penalty or late charge.
• RESPA sets limits on the maximum amount of money the servicer may require you to maintain and pay in the escrow account. (More information about escrow accounts, including how to calculate the maximum amount RESPA allows the lender to require in the escrow account.)

Multistate Home Lending www.multistatehomelending.com and The Manufactured Home Lending Source www.mh-lending.com are committed to full and complete disclosure. All of our loan officers are registered with the Nationwide Mortgage Licensing System and Registry (Registry), a database established by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the States. As part of this registration process, mortgage loan originators must furnish to the Registry background information and fingerprints for a background check. The S.A.F.E. Act generally prohibits employees of an agency-regulated institution from originating residential mortgage loans without first registering with the Registry.

Part I of a Three Part Series

When the FDA required food manufacturers to reveal the ingredients, nutritional value, calorie count and net weight on their product labeling, the big winner was the consumer. The consumer wins again now that Department of Housing and Urban Development (HUD) has set a standard for loan transparency. As of January 2010, all loan originators are required to give borrowers a loan “ingredient” list called a Good Faith Estimate (GFE). This three page “label” is structured within the Real Estate Settlement Procedures Act (RESPA) and clearly discloses key loan terms and closing costs to the borrower. Actually the Good Faith Estimate is more than a guesstimate, because once presented to the borrower, it is a binding statement of costs with few exceptions. A loan originator must issue a GFE no later than 3 business days after the loan originator receives either an application or information sufficient to complete an application and failure to provide a GFE to a borrower is a violation of Section 5 of RESPA. However, if the loan originator denies the loan before the end of the three business day period, or if the applicant withdraws the application, then the GFE does not need to be provided nor does the Special Information Booklet. HUD’s new settlement cost booklet (pdf version – updated 1/6/2010 with corrections of minor detail)

The only fee that a loan originator can charge before issuing a GFE is the cost of a credit report. However, it is important to note that a GFE is not a loan commitment—it is simply an estimate of settlement charges a borrower is likely to incur to obtain a specific loan. So just because you receive an acknowledgement of receipt of your GFE, the lender cannot automatically conclude that this is an expression of your intention to proceed with the loan or a promise by the lender that they are able to provide you with the loan. Generally speaking if a borrower does not express an intent to continue with an application within ten business days after the GFE is provided, the loan originator is no longer bound by the GFE. Also worthy of note is if a GFE was provide but the interest rate has not been locked, if there are changes to the interest rate dependent charges or loan terms a revised GFE must be issued.

So who exactly is a loan originator? A loan originator is either a lender or a mortgage broker.

And, what constitutes “sufficient” information?:

1. borrower’s name
2. borrower’s monthly income
3. borrower’s social security number to obtain a credit report
4. property address
5. estimate of value of the property
6. loan amount and
7. any other information deemed necessary by the loan originator.

After a loan applicant both receives a GFE and indicates an intention to proceed with the loan covered by the GFE, the loan originator may collect fees beyond the cost of a credit report for origination-related services. Some of the fees included in the loan will typically be categorized under processing and administrative services which encompass functions involved in title and origination service. Processing and administrative services include, but are not limited to the following: document delivery, document preparation, copying, wiring, preparing endorsements, document handling and notarization.

In a real estate sales transaction where there is a contract between borrower and seller, the GFE only impacts the borrower. So let’s say there are other charges in a loan transaction that are customarily charged to the seller, they do not need to be included on the GFE. However, if the seller has agreed to pay charges that are normally borrower responsibility (i.e owner’s title insurance), then those charges should be disclosed. The Good Faith Estimate offers the borrower a chance to make a more informed decision and weigh and balance the cost ramifications before him.

The fact that TB&W was shut down this week did not create an earth-shattering news event.   The reason:   the impact of this bank closure is less like an earthquake than a tsunami—the wave of destruction hasn’t hit the shore yet.  This a behind the scenes implode and as yet has not completely reverberated to the ultimate borrower.   As a wholesale bank, TB&W was where mortgage brokers often went for the loans that no one else would do:   for instance the very difficult FHA-insured manufactured home loan.   TB&W was one of the diminishing loan options for manufactured homes and for those borrowers, shopping for loans, they may find the playing field significantly down-sized.   Just considering the loans that were likely already in line for underwriting, there are an anticipated 30,000 loans who now may be homeless.  And for some people that already were ready to move into homes ready to fund, they may be homeless as well.

For those of you that had your loans in the pipeline, your lender may be scrambling to place you.   There is the tick-tock of the appraisal shelf life,  your loan lock rate, your next mortgage payment due date—and now all is up in the air.   Any borrower who has a loan in the works needs to contact his loan officers and not just ask hard and fast questions, but demand them, “Where was my loan being placed?   Do you have a back up source?   When will my appraisal expire?  If you were putting my loan with TB&W, what is your back-up plan?”   If there is any sense of hesitation, any wishy-washy-feel-good responses, any skirting-around-the-issue stall tactic, stop right there!   It is time to take matters into your own hands.  (more…)

Just like all real estate, there is no doubt that the economic decline has impacted values in manufactured home communities.   However, condo parks have been harder hit than the broader community because financing for manufactured homes in condominium-classified parks completely disappeared for the last couple of years.   Except for hard money loans, private financing or VA loans, money simply dried up.   Investors shied away from any loan that was not FHA-insured which also included Reverse Mortgage or Home Equity Conversion Loans.   And it’s a vicious cycle.  Without loans, the sales market becomes stagnant and without sales, appraisers can’t find comparative values to provide a reasonable worth for your home

Fortunately, back in July Congress passed sweeping legislation that removed the condo exclusion, but it wasn’t until May that the Mortgagee Letters were released paving the way for financing opportunities.   However, the hard work has just begun.   Before a single loan can be originated, the park itself must receive approval from Housing and Urban Development.   This is no small feat and even once all the documentation is presented to the local overseeing HUD agency, the wait time for approval is 6-8 weeks.

There are many anxious lenders and homeowners that are excited about the new lending possibilities and the fact this will ultimately add more vibrance to the park community as well as increase the value potential of your home.   Yet, this is still a time to proceed with caution and not make any decisions until your management or HOA has expressly declared that the park has received approval.   The reason this is so critical is that over-anxious lenders are often encouraging a quickstart of the loan process by getting an appraisal.   This can have serious repercussions in a volatile market when the shelf-life of an appraisal is approximately two months.   Since most lenders don’t have an in-house underwriting department and the waiting line for an file evaluation is sometimes 3-6 weeks, your appraisal could be old before you start.

In addition, even once the park receives approval, there is another rigorous checklist for manufactured homes themselves.   First and more importantly your home must be newer than June 15, 1976.   No matter how beautifully renovated your home is or how updated its appearance, there are no exceptions.   The home must also be in its original location—so if the home was moved from another park, FHA will not insure the loan. The home must also be titled as real property and cannot be located in a flood plain.     Additionally, the home must be on a permanent foundation which must not only meet the local jurisdictional guideline but the HUD Permanent Foundation Guide For Manufactured Homes and an engineer must testify to this fact.   However, please don’t run out an install a foundation system prematurely.   This can generally be incorporated within the scope of the loan and should be the very last step of any loan process.   There is no sense spending several thousands of dollars on a foundation only to find out there are other issues that will complicate the loan.

When choosing a lender, carefully evaluate your options.   Ask specifically for referrals from other manufactured home owners.    You want a lender who understands that manufactured homes have specialty requirements and knows those requirements backwards and forwards.  And when choosing a foundation specialist or engineer for the certification, make sure you are working with one who will not charge you for a “failed” report and will your interests by not obligating you to a foundation retrofit or repair until the loan has the approval greenlight.

www.themanufacturedhomelendingsource.com and www.onthelevelcontractors.com

Finding the right lender

Fair or unfair to manufactured home borrowers, most lenders view manufactured homes with derision. We’ve all heard the term —trailer trash—well that’s how most lenders continue to characterize the manufactured home loan. Without owning the land, the manufactured home is pigeon-holed into a high percentage rate personal property loan. Even when the home sits on real property, the stigma persists in the minds of lenders that a homeowner will pull up his 5th wheel, hitch up the home, pull up stakes, and disappear down the road in the middle of the night – leaving the investor, high and dry. Although the portrait being portrayed treads on the side of ridiculous, the real concern for the lender is not only dismissing the above stigma, but how a simple classification of titling can significantly alter an investor’s mentality from “trailer” to legitimate dwelling. (more…)

Proving your home is a HUD Home

Manufactured home loans are very unique in that in order to qualify for a loan, the lender has to qualify more than just your ability to repay the loan and the fact that your home is a good risk based on the value. Manufactured homes have their own checklist of requirements, one of which is proving the home is a HUD home. And the best proof is the THE HUD TAG or LABEL that is attached to the rear of each section of the home. Unlike the textile tag on pillows and mattresses that says DO NOT REMOVE and everyone does anyway. This is the one label you should not remove. (more…)