by David Depman

Approved.  Not Approved.  What happens before that stamp is inked and pressed involves a bit more than a stamp and ink. Myriad regulations have already been conceived, debated, negotiated, and implemented. And as the center piece for real estate transactions, Loan Officers are the often the point on which regulations are focused.  Many regulations came into force in 2014, and some more are coming in 2015.  So what should you expect? How will these new regulations affect your business and how can you make it work for you?

It will be a pain in the rear the first couple of months…

What Regulations Will Hit in 2015?

After more than three years of work, regulators say they are finally wrapping up some of the key pieces of the 2010 Dodd-Frank financial law.  But don’t fret, the discussion regarding the end date isn’t over yet: “I don’t know whether I’d say by the end of the year, but I think we’re definitely in the home stretch,” said Federal Reserve governor Daniel Tarullo.

By forging ahead with confidence and knowledge, you will be a great asset to those with whom you work, gaining their trust and their recommendations.

TILA Appraisals for Higher-Priced Mortgage Loans (Regulation Z)

The bulk of this regulation was implemented January 18, 2014. A delayed requirement of this broader regulation is the requirement for a full interior appraisal of manufactured homes.  Appraisals will be required by a certified or licensed appraiser for non-exempt “higher-risk mortgage loans for certain manufactured homes” from July 18, 2015. In addition, the rule requires creditors to provide the consumer with a copy of all written appraisals performed in connection with the HPML at least 3 days prior to closing.

TILA-RESPA Integrated Disclosure rule

On August 1, 2015, the TILA-RESPA Integrated Disclosure rule comes into effect. The rule integrates the mortgage loan disclosures required under TILA and sections 4 and 5 of RESPA. In short, it has new requirements and two disclosure forms that consumers will receive in the process of applying for and concluding a mortgage loan. The rule applies to most closed-end consumer mortgages. They are the Loan Estimate and Closing Disclosure forms that will (essentially) replace the Good Faith Estimate, Truth-in-Lending and HUD-1 disclosures. The new Integrated Disclosures must be provided by a creditor or mortgage broker that receives an application from a consumer for a closed-end credit transaction secured by real property on or after August 1, 2015.

Keep in mind, the politicking, and lobbying are far from over. “It’s something there’s going to be continued discussion about” said Mark Calabria, director of financial regulation studies at the Cato Institute, so stay tuned.

It’s something there’s going to be continued discussion about

How Will They Affect Your Business?

How will these regulations affect your business? The answer is probably the same as the effect of previous regulations: in both predictable and unpredictable ways.

Regulations are having, and will have, an effect on the business of being a Loan Officer. One example is that regulations may keep things slow for the foreseeable future.  Wayne Abernathy, the executive VP of financial institutions policy and regulatory affairs at the ABA said “Dodd-Frank regulations on mortgages played no small part in the fact that the mortgage markets remain somewhat repressed”. Similarly, the effects of new minimum down payment requirements and a proven ability-to-pay, may significantly limit future non-governmental residential mortgage opportunities.

An expected positive effect is cost savings to financial institutions due to the new eClosing initiative.  eClosing will employ the use of electronic signatures to create a streamlined closing process.  Lenders can also integrate web-based video communication and signature procedures.  eClosing will also ensure that all documents are accessible to all parties for the duration of the loan in an eVault. The net effect is expected to lower costs for both consumers and lenders alike.

Whatever the effects on your operations, you will be dealing with the same issues that your competition is.  The one who handles this change faster and better will be ahead of the game and ready to take advantage of 2015.  The outlook calls for a gradual rise in interest rates from the current 4.3 to the 5% range by end 2015*, and a 7% general increase in home prices for 2015 calendar year**.  Regulations won’t stop the market.

How Can You Make It Work for You?

So, what can you do about the coming changes? Like a good scout, be prepared. But like a better scout, be prepared AND communicate with your business associates, clients and potential clients. Regulations are change, and for some, change can be difficult. Plan ahead and prepare to roll out your implementation early (as early as April or May to test prior to the deadline).

Your clients will be traveling with you through uncharted terrain. Your preparation will be your guidance.  Learn as much as possible about the new regulations, preparing for new transaction processes, understanding the new QM rules, and making sure your partners and vendors are qualified and up to speed.

Begin communicating your efforts early and keep your client-base informed with timely and interesting updates across all your communication channels like Facebook, Linkedin and Twitter.  Change like this presents great opportunities for direct communication with potential clients and former clients. By forging ahead with confidence and knowledge, you will be a great asset to those with whom you work, gaining their trust and their recommendations.  And that will help your pipeline more than regulatory reform will affect it.

(And if you’re still fretting, take heart from the words of Phillip Schulman, partner at K&L Gates LLP:

“The implementation challenges are now … You’re going to be fine. You’ll survive. We will get through this. We will figure out how to get it done. It will be a pain in the rear the first couple of months, but by the end of 2015, you won’t even remember what the old forms looked like. So don’t panic.”)

* http://www.freddiemac.com/finance/pdf/September_2014_public_outlook.pdf

** http://blog.altosresearch.com/wp-content/uploads/2014/07/Altos-Research-Housing-Outlook-2015.pdf