Does the average person really understand the mechanics behind a residential mortgage loan? I ask that question because most people that I speak with make a very common statement which is “my last loan did not require all of this documentation and it did not take this long.” Well they are correct on both statements and it is due to Financial Reform. Financial Reform did need to happen but who is watching over this? So which political people are going to get a kick back for this backdoor deal? So let’s break this down.
We all know or should know about the HVCC or Home Value Code of Conduct appraisal process. The HVCC process is flawed and Andrew Cuomo the master mind behind the HVCC process even admits the flaws but is unwilling to address it. So while Mr. Cuomo keeps his head stuck in the sand everyone pays on average 75% more for an appraisal today. The odd thing here is that an Underwriter can still cut value or take issue with the appraisal that the HVCC process requires you to use and yet your loan officer can not speak with the appraiser to help address an issue. Worst of all I had to wait 12 days for an appraiser to return from a vacation to address a simple type O. This delay cost the borrower $1,200 and the HVCC process does not allow for anyone to be held accountable. This is more common than you think.
As of Jan 1st 2010 a broker was required to show YSP or Yield Spread Premium. So what is this, well it is the back side money that is in every loan. Well oddly enough Congress did not feel it necessary for Banks to have to disclose their back side money. The reason being is that the back side money that a bank earns is called SRP or service release premium. So what is the difference, YSP is a percentage of the expected SRP at the time the loan is locked. The difference is when the moneys are paid in terms of time frame. The structure in which the back side money is generated is exactly the same. So you tell me – why did Congress exclude banks from having to show their back side money?
As of April 1st 2011 Congress has decided to make YSP illegal to be paid at the closing of a real estate transaction. So what is the big deal, right? Wrong! The system is not perfect but at least when you had YSP a Broker showed you all of the fees and the YSP and you knew. As of April 1st 2011 the system will show you nothing and then you are at the mercy of the Banks. The Loan Officers are going to do what the Banks tell them to do because they have to follow Bank protocol. So this will be buyer beware and it is all legal. Imagine that!
Just as with everything if you can get a better deal on a pair of shoe you buy it where they are less. After April 1st 2011 the remaining competition for banks will be gone and no one will even ask why. And yet another Congress person will have an amazing stroke of great investments doubling or tripling their net worth, imagine that! It seems that as we become more and more dependant on the Government we seem to get more and more taken advantage of. Yes we need government but we do not need them everywhere. I can only assume that I am the minority because I have a different view point or maybe it is because I understand how the system works. Either way we need to all not cry foul and take care of ourselves. Because if anyone takes care of you for anything do not kid yourselves there is going to be a cost.