New Regulations – More Safeguards for Seniors

Over the last year, I have written a monthly column on Reverse Mortgages for Senior Magazine. My goal has been to educate the consumer on everything you need to know about the reverse mortgage program (good, bad, or otherwise) and to keep you current on any changes and enhancements to the HECM(Home Equity Conversion Mortgage) which is a FHA insured reverse mortgage program. My past columns have included Myths & Misconceptions; Why the Fees are So High; When Not to Get a Reverse Mortgage; Lending Limit Increase, Fixed Rate vs. Variable Rate Programs; Reverse Mortgage for Purchase; Purpose of the Independent Third Party Counseling; Tips, Research, & Questions to Ask When Looking into a Reverse Mortgage and Reasons Why Some of My Clients Decided to Get a Reverse Mortgage, to name a few.

This month I want to share with you some changes that apply to both reverse mortgages and forward – conventional loans.

The first change has to do with the Good Faith Estimate (GFE) and the Settlement Statement (HUD-1). Anyone who has purchased or refinanced a home knows the GFE outlines the fees at the beginning of the loan process and the HUD-1 shows your actual costs at the end of the loan process. Too often a borrower went to closing only to learn the fees on the HUD-1 were very different to the fees disclosed on the GFE. Thanks to the reform of the Real Estate Settlement Protection Act (“RESPAî”), lenders, loan originators and brokers will be held accountable for certain differences, making it difficult for those charges to be significantly different at closing without valid changed circumstances. This is accomplished through the new standardized GFE and HUD-1 forms which better explain the terms and costs when you apply for such a loan. In addition, there are new rules regarding re-disclosures and tolerances.

In the reform, changes to fees quoted in the original GFE must be supported by a valid changed circumstance. These valid changed circumstances include, but are not limited to the increase or decrease in the loan amount or value, property condition or an applicants desire to change the program originally requested. In the first section of the new standardized GFE, “Your Adjusted Origination Charges”, will not allow the amount of the charges originally disclosed to be raised unless there a valid changed circumstance. These are charges the lender or broker controls such as loan origination fees. If there is not a valid changed circumstance, these charges can only decrease from the original estimate.

In the second section of the GFE, “Your Charges for All Other Settlement Services”, there are certain charges that can only change by 10% unless there is a valid changed circumstance. Some of these fees include title, escrow, notary, appraisal, recording fees, etc. Should these charges change by more than 10% without a valid changed circumstance, the lender or broker will have to absorb the difference.

Finally, the GFE does allow for some charges to vary. These charges usually involve a service, you the applicant are allowed to shop for, such as homeowners insurance. The beauty of the RESPA reform is that it seeks to protect and do what is best for the consumer.

Another change in 2010 has to do with FHA Appraiser Independence. FHA has redefined appraiser independence and requires lenders to have tighter controls during the appraiser selection and process. These tighter controls promote more accurate appraised values by removing commissioned based employees from the appraisal process, helping to eliminate possible conflicts of interest.

As I reflect on these changes, I only wish they were in place much sooner for all mortgages. Unfortunately, it took the forward mortgage meltdown for these changes to take place and luckily, the reverse mortgage industry had nothing to do with the mortgage meltdown. However, reverse mortgages did take a hit, due to the decline in home values, and some seniors are finding it more difficult to obtain a reverse mortgage.

As a proud member of the Generation Mortgage Company™ team, I can tell you, Generation Mortgage has always strived to present the GFE and HUD-1 with the most accurate charges. For those of you that have read my past columns and have heard me, Rich Young, and Stan Atkinson on Newstalk 1530, you know that Generation Mortgage is the most experienced reverse mortgage company in California. We are very proud of our A + rating with the Better Business Bureau. We have always said you should do business with an experienced, reputable company you can trust. If you have any questions regarding these new changes or any questions regarding the reverse mortgage program, I would be more than happy to assist you.