Here’s How The Government Shutdown May Delay Your Home Purchase


The last time the U.S. government shut down was in October 2013. What we learned back then is that mortgage loan processing hit a roadblock in the loan verification process. When nonessential workers from the Internal Revenue Service and the Social Security Administration were sent on furlough, there were no workers with the IRS who could verify that your tax returns had been filed, nor were there workers in the Social Security Administration to verify the validity of your social security number. While some lenders decided to close loans without these security measures, some thought the risk was too high and opted to delay loan closings.

The Department of Housing and Urban Development (HUD) has local and regional offices throughout the country that offer guidance on FHA loans. With an extremely limited staff on-site, lenders will see delays in getting answers to their questions. Lenders do have another option with FHA’s Resource Center and National Servicing Center’s (NSC) Call Center that will be available to answer their questions. If the questions need to be elevated to HUD staff, the questions may not be answered until the staff returns to work. With the shut down in effect, FHA will still be able to endorse single-family home loans, but not Home Equity Conversion Mortgages, or Title I loans.  FHA Connection will remain accessible to assign case numbers.

The Credit Alert Interactive Voice Response System (CAIVRS) will be available ,however FHA may not be able to ensure that the information contained in the system is up-to-date. Because the purpose behind the CAIVRS verification is to ensure that no borrower with delinquent, Federal, non-tax debt is given a new FHA-insured loan in accordance with the Debt Collection Improvement Act, lenders may decide to delay loan funding.

The decision to close a loan, or not, will be decided by each individual lender, so you should contact your lender to review how their decision will impact your loan closing and interest rate lock period.

A protracted shutdown could see a decline in home sales, reversing the trend toward a strengthening market that we’ve been experiencing.

Sylvia M. Gutiérrez is author of Mortgage Matters: Demystifying the Loan Approval Maze. RealWorks Press: 2015. Available at Amazon, Barnes & Noble, iTunes, and independent booksellers everywhere. Distributed by Ingram.Licensed
Registered mortgage loan officer with NMLS id: 372427
2018 Vice President, South Florida Mortgage Bankers Association
Associate Member, National Association of Real Estate Editors
2014 thru 2017 Diversity & Inclusion Co-chair, NAMB – Association of Mortgage Professionals




Understanding the VA Home Loan Benefit

Today is the day we’ve set aside to honor those who have served our country through military service.  Each of us, in our own way, has the ability to give something to show our appreciation.  Because financial education is so important for all aspects of our lives, I’m sharing my insight to clarify information on using the VA benefit of home financing.

Loans guaranteed by the U.S. Department of Veteran’s Affairs (VA loans) help service members, veterans, and eligible surviving spouses become homeowners. VA home loans are provided through authorized private lenders, such as banks and mortgage companies, and are not directly available through the VA. For information on eligibility, supporting evidence, and instructions for application to receive confirmation of benefit eligibility to present to your lender, visit the Certificate of Eligibility.

VA home loans can be used to:

  • Buy a home, townhome, or a condominium unit in a VA-approved project
  • Build a home
  • Simultaneously purchase and improve a home
  • Improve a home by installing energy-related features or making energy efficient improvements
  • Buy a manufactured home and/or lot


Tip: If VA financing is for you, it’s important that you seek and connect with both a realtor and a mortgage professional that are fluent in the workings of the VA home loan eligibility standards. If you fall into the hands of someone who isn’t schooled in the intricacies of VA financing, you may find yourself locked out of an opportunity.

When reviewing your loan program options with your lender,  be sure to tell them if you may qualify for VA home loan benefits as nine times out of ten, this program will be the best priced, require the least out-of-pocket monies and offer the most flexibility in underwriting standards. As complex as mortgages can be, there are many additional intricacies that apply exclusively to VA loans. Here are some clarifications over common misconceptions about VA loans:

  • You don’t have to be a first-time homebuyer
  • You aren’t limited to a maximum purchase price of $417,000 (check loan limits in your area)
  • You can reuse the VA benefit through reinstatement
  • VA-backed loans may be assumable


The Benefits of a VA Loan

  • Zero down payment is required for a purchase transaction when the sales price doesn’t exceed the appraised value, the amount financed doesn’t exceed four times your entitlement benefit, and the loan amount is $417,000 or less. In cases where the valuation is less than the sales price, you can choose to proceed with the purchase at the higher price as long as you make up the difference between the sales price and the appraised value.
  • There is no requirement of monthly mortgage insurance premiums.
  • VA loans typically provide the lowest total monthly payment when compared to FHA financing and conventional financing with mortgage insurance.
  • There are no prepayment penalties.
  • They are assumable by a buyer. Assumability means that the buyer may be eligible to take over payments on the VA loan regardless of whether they are civilian or military. A word of caution: Unless you obtain written approval from the VA (not the mortgage servicer), a veteran will remain liable on the assumed loan even after the sale of the property. Be sure to go through this extra step to protect yourself against possible future financial mismanagement by the buyer.
  • Up to 100 percent of the valuation may be available on a rate and term refinance.
  • Up to 90 percent of the valuation may be available on a cash out refinance.
  • Financing is available with credit scores as low as 620.


Tip: When presenting an offer for purchase, ensure the agreement includes an addendum for the VA Option Clause. Here’s a sample of a VA Option Clause:
“It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described herein if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs.”

Understanding the Intricacies of VA Loan Guaranty

The VA loan guaranty is insurance that the Department of Veteran’s Affairs provides the lender.  The VA guarantees a portion of the loan, which enables the lender to provide you with more favorable terms. Guarantee simply means the lender is protected against loss in the event of a foreclosure and replaces the protection the lender would normally receive by requiring a 20 percent down payment and/or private mortgage insurance. This guarantee allows the veteran to obtain more favorable financing terms.

VA Funding Fee

The VA charges a funding fee to pay for this insurance. The VA funding fee is required by law and can cost you anywhere between zero and 3.3 percent of the loan amount depending on your eligibility status, whether you’ve used your VA benefit in the past, the size of your down payment (if any), and whether you qualify as a service-connected disabled veteran or are the surviving spouse of a veteran who died in service or from a service-connected disability. The fee is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduces the cost passed on to taxpayers. When refinancing a VA loan with a new VA loan, the new loan is eligible for a reduced funding fee of .5 percent.


The VA provides each qualified veteran with at least $104,250 in entitlement and extra entitlement in select high cost counties as determined by HUD. Entitlement requires that 25 percent of the loan amount be guaranteed to the loan. With that, a portion of the entitlement is charged to the loan as a guaranty to the lender in the event of default. All qualified veterans start out with $36,000 in basic entitlement and $68,250 in bonus entitlement or $120,375 bonus in Alaska and Hawaii. With the basic amount provided, the veteran receives $104,250 in entitlement and we count this as 25 percent of the guaranteed loan amount of $417,000. With all bonuses available, the maximum guaranteed loan amount can be as high as $1,500,000. The VA provides its yearly updated list of home loan limits online.”

For example, the 2015 VA loan limit for Miami-Dade, Florida, is $417,000. This means that if the veteran has full entitlement, the VA will provide a 25 percent guaranty on the loan up to $417,000. If a veteran has a contract to purchase a home in the amount of $480,000, the lender may require the veteran to make a down payment of 25 percent of the $63,000 difference, which would be $15,750, providing the lender a full 25 percent guaranty. In the same example, a borrower not using VA benefits and instead opting for using a conventional loan product, may have to place a traditional down payment of 20 percent of the total purchase price which in this case, would be $111,000.

Understanding entitlement benefits can be a little tricky. If a veteran purchased a home using his VA entitlement (in full or in part), the mortgage on that loan is assigned a portion of his entitlement as guaranty. Because VA loans are assumable, a veteran can sell a property and have the existing VA mortgage assumed by the new buyer. If that new buyer is an ordinary citizen with no VA entitlement benefits, the seller’s VA entitlement stays with that mortgage and the veteran is not released from liability. If on the other hand, the new buyer is active military or a qualified veteran and has entitlement benefits that he can assign to the existing VA mortgage, the seller can take back his entitlement and be released from future obligations on the existing note. With release, veterans can use the home loan benefit multiple times. Release is requested through the VA.

Restoration of Entitlement

Veterans can have previously used entitlement restored to purchase another home with a VA loan by completing VA Form 26-1880 and submitting a request through the VA Eligibility Center if one of these things happens:

  • The property purchased with the prior VA loan has been sold and the outstanding loan has been paid in full.
  • The property is sold to a qualified veteran-transferee (buyer) who agrees to assume the existing VA loan and substitute his or her entitlement for the same amount of entitlement that was originally used by the veteran seller.
  • If the veteran has repaid the initial VA loan in full but has not sold the property purchased with his initial entitlement under a VA loan, he can still place a request for restoration and use his restored entitlement to gain the benefits of a new VA loan.

Condo Project Approval

If VA financing is the only way to go for you, be sure to not waste your valuable time by selecting a property that is not eligible for financing with a VA guaranty. Resale of existing homes doesn’t require any special approval, however, new construction, condos and PUDs will. Prior to 2009, if a condominium project was FHA certified, the VA would accept the FHA approval for VA loans. As of December 7, 2009, the VA no longer accepts newly added FHA condominium approvals in lieu of an independent VA approval. FHA and VA maintain separate approval lists on their respective websites.

Tip: Narrow your property search by selecting a condo project, planned unit development, or builder of new construction that is already on the VA approved list before you enter into contract. You can search the VA database at Veterans Information Portal Condo/PUD Search Tool (  Searching this site is not exactly user friendly.  You will find that city names are abbreviated and the system is not searchable by zip code. For example, a search for condos in Rancho Santa Margarita, California, has four results; however, a search for Rancho Santa Ma, California, returns twenty-one results. Projects can be listed under original tract numbers, parcel maps, or lot lines, and the project name is often abbreviated. This can preclude the searcher from finding accurate results.  Once you locate your community on the search site, you will find one of three statuses:

  • Accepted without conditions: These communities are 100 percent accepted for VA loans and lenders can use the condo ID with no issues.
  • HUD accepted: This community was accepted under the pre-2009 reciprocity agreement with HUD where FHA approved projects were automatically eligible for VA Guaranty. For the most part, these communities are still accepted by VA, however it is recommended that the lender call the regional VA office that is assigned to the state where the community is located to verify. Current FHA status is not relevant to HUD-accepted VA designations.
  • Unaccepted: VA loans are not permitted in these communities.

Refinance Transactions

VA loans aren’t exclusively for purchase transactions. A VA Interest Rate Reduction Refinance Loan (IRRRL) is a VA-to-VA loan, meaning you are only eligible for this loan program if you are refinancing an existing VA loan into a new VA loan. An IRRRL requires less documentation that provides for quicker loan decisions and carries a lower VA funding fee limited to .5 percent. When considering an IRRRL, keep in mind:

  • Only the veteran and their spouse may be on loan and title.
  • Nonoccupant co-borrowers are prohibited.
  • Co-borrower must be married to the veteran. (Same-sex marriages are now allowed in certain states.
  • The VA must approve eligibility prior to submission to underwriting.)
  • In the debt-to-income calculations, we must include childcare expenses for all children under age twelve.

VA Jumbo Loan Program

The VA limits the loan amount it guarantees, but that does not mean you can’t buy a home that is valued at greater than your full entitlement benefit insures.

For counties where the VA maximum loan amount is $417,000:

  • You don’t need to make any down payment on the first $417,000.
  • When the purchase price is greater than $417,000, your lender may require only a 25 percent down payment on the amount that is greater than $417,000.
  • For loan amounts between $417,000 and $1,000,000, you aren’t able to finance the funding fee, so it must be paid in full at closing either by you or by the seller.


In counties determined to be of high cost by HUD, when the VA loan amount exceeds $417,000, the following applies:

  • You don’t need to place a down payment on the portion below the high cost county loan limit.
  • You will need to place a minimum down payment of 25 percent on the portion of the loan amount that exceeds the high cost county limit.
  • For loan amounts exceeding the high cost county limit and up to $1,000,000, you aren’t able to finance the funding fee so it must be paid in full at closing either by you or by the seller.


Additionally for any VA jumbo loan that exceeds the county limits set by the VA, the following overlays apply:

  • Minimum credit score of 640 for loan amounts above $650,000
  • Manufactured homes are not eligible
  • Two-to-four unit purchase transactions are capped at $417,000
  • Only fixed rate loan products are allowed

To connect with a loan officer and/or Realtor that knows and understands the intricacies of the VA Loan Benefit, seek persons who identify themselves as Military Housing Specialists.  Gain a referral to a local mortgage loan originator or realtor by asking some of your comrades.  Or, seek assistance from one of many public offices available to support service members and veterans.  Here are a few suggestions to help you on your quest:  Veteran’s Service Officers, USO, USA Cares, American Legion, and AmVets.

Sylvia M. Gutiérrez is author of Mortgage Matters: Demystifying the Loan Approval Maze. RealWorks Press: 2015. Available at Amazon, Barnes & Noble, iTunes, and independent booksellers everywhere. Distributed by Ingram.
Licensed and registered mortgage loan officer with NMLS id: 372427

Under TRID, Can A Lender Review Loan Documents Prior to Issuing a Loan Estimate?

As part of the implementation of the final rules of the Dodd-Frank Act, one of the most contested issues regarding the changes under the Truth-In-Lending and Real Estate Settlement and Procedures Act  Integration Disclosure (aka TRID) is the question of whether or not a lender can review loan documents prior to issuing a Loan Estimate. The Consumer Financial Protection Bureau has issued clarification on this and many other questions that lenders, realtors, closing agents, and borrowers have through the Federal Reserve System’s audio conference series on consumer compliance issues that can be found here:  Index of TRID Questions Addressed During Webinars-2.

The short answer to the above question is yes.  A lender CAN review loan documents prior to issuing a Loan Estimate if the borrower volunteers the information.

Borrowers:  When shopping for a home loan, ask your loan officer for a Pre-Application Cost Estimate for any loan program you wish to consider.  This is non-binding to the lender and allows you to view different options prior to deciding which loan program, rate, and terms are best for you.  Information quoted is based on many assumptions including:  loan amount, intended occupancy, credit score, property type, valuation, timing of rate lock, and whether or not your debt-to-income ratio falls under 43%.  Changes to any of these assumptions may result in changes to quoted terms or access to loan programs.

Lenders:  If you haven’t programmed Pre-Application Cost Estimates for your loan officers to assist borrowers in their selection process, you’re behind the 8-ball and may be exposing yourself to unnecessary compliance and fair lending risks.   Also, take a moment and remember when you were buying your first home.  Didn’t you want to see all the closing costs in writing before you made your buying decision?  Before you gave a stranger your social security number?   Allow your LOs to provide the proper tools for borrower decisioning and train your LOs to go over the above mentioned assumptions.  With a clear explanation of risks, an educated borrower will appreciate the lesson and identify you’ve earned their business.

Sylvia M. Gutiérrez is author of Mortgage Matters: Demystifying the Loan Approval Maze. RealWorks Press: 2015. Available at Amazon, Barnes & Noble, iTunes, and independent booksellers everywhere. Distributed by Ingram.
Licensed and registered mortgage loan officer with NMLS id: 372427
Diversity & Inclusion Co-chair, NAMB – Association of Mortgage Professionals
Government Affairs Chair, South Florida Mortgage Bankers Association
Associate Member, National Association of Real Estate Editors

6 Basic Steps to Mortgage Approval

Has this ever happened to you? You are pre-qualified with a lender for a certain loan amount and spend the next few weeks with a Realtor searching neighborhoods until you find the perfect place and negotiate a contract. You are through the moon excited because it’s the right price in the right location. You tell your parents. You tell your friends. You tell your co-workers. You tell your book club members. You tell everyone you know that you’ve finally found your dream home and that you’ll be moving in a few weeks. Then, three weeks down the road, you get the call, “I’m sorry Mr. Smith, but we are unable to approve your loan request.” Your stomach sinks to the floor.  Everything had seemed to be going along perfectly. You gave everything that was asked of you, time and again. What happened?

That experience can be both embarrassing and hurtful to you and your family. Whether you are a first-time homebuyer or a long time real estate investor, understanding and preparing for each step of the loan approval process can avoid delays due to missteps, miscalculations, misunderstandings, and unintentional misrepresentations.  Too many times, buyers simply go off the estimations given with a pre-qualification and commit to a property only to learn later on that something about the initial data listed on their loan application was significantly different from verified data.

The process of mortgage approval is basic, but it consists of six steps. In the above scenario, you probably started with step three, skipped over steps four and five and then expected to land on step six. The first two steps are completed without the involvement of your lender and will require a significant investment of your time, attention to detail, and effort in making corrections where necessary. The remaining four will have you working closely with your lender.

Step 1: Credit Report

Knowing your credit profile is key in determining loan program eligibility. Get a copy of your credit report and dissect it looking for errors and confirming accuracy.  You can obtain a free copy of your credit history annually at While this is a good place to start, it doesn’t provide your FICO score that loan officers will need as a guide to prepare cost estimates and have discussions around loan program eligibility. Service providers such as Identity Guard provide you with access to your scores from all three credit repositories (TransUnion, Equifax and Experian) for a monthly fee and have options to help you monitor credit activity, prevent identity theft and model the impact of changes to your credit profile.

Step 2: Supporting Documentation

Gather all documentation as listed on the Comprehensive Mortgage Documentation Checklist.

Step 3: Pre-Qualification

Sometimes people use the words pre-qualification and pre-approval interchangeably, but as they apply to mortgage financing, they turn out to mean quite different things. In the pre-qualification phase, we take a look at your loan program options. You’ll likely have a discussion with a loan officer where you’ll share the amount of monies you have available for down payment and closing costs, your monthly income, recurring debts and offer an estimate of  your credit score. Quick calculations are performed that suggest how much home you can afford and discussions are had over which loan programs you may be eligible.  You’ll also learn what documentation is needed and have a general expectation of the timeline for when you should make formal application and the application fees that will be required.

While pre-qualification is an important step in the process, if all you have is a pre-qualification letter, you essentially don’t have a solid commitment to lend from a creditor.  A creditor is the entity that funds your loan. It could be a bank, a nonbank mortgage company, or a private investor. Within each of these classifications, there are hundreds of entities providing different loan product options, adhering to different underwriting guidelines, lending on only certain types of housing, and pricing their loans based on assessed risk and desired profit margins.  I use the term “loan officer” throughout for reader clarity, but you can make application directly with a representative of any of these creditors or you can engage with a mortgage broker who searches for a creditor that matches your specific needs.

Step 4: Pre-Approval

The US government has decided that a lender cannot “require” that you provide supporting documentation before it issues loan disclosures. That said, it doesn’t disallow a lender from collecting supporting documentation.  This post isn’t about what a lender needs to do to stay compliant with government regulations.  This post is about how you can successfully navigate the mortgage approval process.  Bring your supporting documentation to your lender meeting so that you can have a meaningful conversation over program eligibility, identify areas of concern and list accurate data on your loan application.  Gathering documentation is time-consuming.  If you’re someone who struggles with organization, put your financial house in order right now in preparation of homeownership by following the instructions in Step 2.

Your lender will obtain a copy of your credit report using one of their vendors.   Program eligibility is once again reviewed and pricing is re-calculated based on your now verified representative credit score.  At this point, you may need to reconsider loan programs or down payment options if your credit score varies significantly from your initially estimated score. When you make loan application, you can only select one loan program for lender consideration.

With a program selected, the data on your loan application is run through an Automated Underwriting System (AUS). A lender will typically use Desktop Underwriter (DU) or Loan Prospector (LP) that are the proprietary underwriting systems for the government-sponsored entities (GSEs) Fannie Mae and Freddie Mac, respectively.  Sometimes a lender will use their own proprietary AUS system to accommodate for their specific portfolio lending programs or additional overlays (restrictions) to GSE guidelines. Based on the initial AUS findings, the loan officer will receive a recommendation and a list of loan conditions.

While a pre-approval is significantly better than a pre-qualification because credit history is reviewed and a recommendation of approval is received, an underwriter (decision maker) has still not reviewed your supporting documentation.  A pre-approval just sits with the loan officer until you receive and review loan disclosures and issue your Consent to Proceed with the loan application.

Step 5: Conditional Loan Commitment

You may be thinking that you don’t have to go through the trouble of a “formal” review of your loan application but you should because rarely is the income you disclose at application the qualifying income that a lender can actually use. Once consent is recorded and application fees are collected, only then is your loan file submitted to an underwriter for review.  This process can take as little as two days or as long as four weeks, depending on lender turnaround times.  Having submitted all necessary loan documentation, you should expect this initial conditional loan commitment to be issued subject only to acceptable appraisal, clear title and property insurance.  

Now you can begin shopping for a home.

Step 6: Final Loan Commitment

With a purchase contract in hand, a lender then orders a property appraisal and a title request is sent to your selected settlement agent. When the appraisal comes in, you are given a copy and you will begin working with your insurance agent to secure adequate property insurance coverage and provide evidence of that coverage through a Certificate of Insurance.

When the lender receives all documentation complying with the preliminary loan conditions and the appraisal is in, the file goes back to the underwriter with the hopes that the documentation submitted complies with the requirements to satisfy loan conditions and a Final Loan Commitment is issued.  The Final Loan Commitment will show that all preliminary funding conditions are cleared and will list any pre-funding conditions that must be satisfied. Most pre-funding conditions can usually only be satisfied at the closing table or within ten days of closing, so you’ll never receive a final loan commitment that is completely free of conditions.

It’s important for you to follow the steps in the process. While its good to know where you stand, don’t make the mistake of the homebuyers in the above example by pausing at pre-qualification and jumping into contract negotiations. Know your credit, gather your supporting documentation, research lending programs, and shop pricing and loan eligibility with different lenders.

Sylvia M. Gutiérrez is the author of Mortgage Matters: Demystifying the Loan Approval Maze.  Miami: RealWorks Press, 2015.  Print and eBook.


A New Way to Improve Your Credit Score

For those seeking a loan, credit scores are the number one factor that affect cost of credit and loan eligibility. For this reason, ensuring that your credit report accurately reflects your payment history is a top priority. In a 2012 study by the Federal Trade Commission at least one in five people found an error on their credit reports. At least 20% of those who identified and corrected the error experienced an increase in their credit score, which increased the likelihood of being offered a lower interest rate on a loan.

Many people struggle with the often intimidating process of disputing inaccurate information that is disclosed on their credit report. The Federal Trade Commission has issued a follow-up study of credit report accuracy that recommends that credit reporting agencies improve the process they use to notify consumers about the results of dispute investigations, and that they better educate consumers regarding their rights to review and dispute inaccurate information.

In response to the study findings, the three nationwide credit bureaus – Equifax, Experian and TransUnion – announced today a National Consumer Assistance Plan that will provide you with more transparency and a better interactive experience when disputing incorrect data. The credit reporting agencies have collaborated in an unprecedented manner to share industry best practices and develop a meaningful plan to improve consumer interaction and enhance data accuracy and quality. Here are a few highlights from the National Consumer Assistance Plan:

Consumer experience:
• Consumers visiting, will receive a free credit report once a year and will see expanded educational material.
• Consumers who dispute information and resolve errors will be able to obtain another free annual report without waiting a year.
• Consumers who dispute items will receive the results and a description of what they can do if they are not satisfied with the outcome.
• Enhanced dispute resolution processes are available for consumers that are proven victims of identity theft and fraud, as well as those involved in mixed file situations.

Data accuracy and quality:
• Medical debts won’t be reported until after a 180-day “waiting period” to allow insurance payments to be applied. The agencies have agreed to remove from credit reports previously reported medical collections that have been or are being paid by insurance.
• Data furnishers will be prohibited from reporting authorized users without a date of birth and the agencies will reject data that does not comply with this requirement.
• The agencies will eliminate the reporting of debts that did not arise from a contract or agreement by the consumer to pay, such as tickets or fines.
• A multi-company working group will be formed to regularly review and ensure uniformity in the data submitted in a consumer’s credit report.

The FTC has a wide range of general information for consumers on credit reporting issues, including Free Credit ReportsDisputing Errors on Credit Reports, and It Pays to Check Your Credit Report. It also has information available on how credit scores affect the price of credit and insurance and what consumers need to know about their credit reports when looking for a job.

To learn additional information about nationwide credit repositories visit:

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The CFPB Has Confirmed What Loan Officers Have Always Known

In a January 2015 study, the CFPB has confirmed what loan officers and mortgage brokers have always known, the first provider to engage with the borrower has the highest likelihood of acquiring the loan transaction. For about 77% of borrowers, the mortgage shopping process stops after their first application. That is significant.

The interest rate on a mortgage is one of the key components of the mortgage’s total cost, and offered mortgage interest rates vary across lenders, implying that consumers can potentially save a significant amount of money if they shop effectively. But interest rates are only one component of finding the right lender match. To shop effectively, a consumer must must know what features and benefits are available and what eligibility standards are applicable. Not all lenders offer the same loan products and not all lenders follow the same credit criteria.

Key findings from the National Survey of Mortgage Borrowers include:

      1. A sizable share of borrowers report that factors not directly related to mortgage cost, including the lender or broker’s reputation and geographic proximity, are very important in their decision making. Borrowers who express such preferences are much less likely to shop.
      2. Almost half of consumers who take out a mortgage for home purchase fail to shop prior to application; that is, they seriously consider only a single lender or mortgage broker before choosing where to apply. The tendency to shop is somewhat higher among first-time homebuyers.
      3. The primary source of information relied on by mortgage borrowers is their lender or broker, followed by a real estate agent.
      4. Consumers who report being unfamiliar with the mortgage process are less likely to shop and are more likely to rely on real estate agents or personal acquaintances.


The study goes on to ask consumers what characteristics – besides interest rates or other mortgage terms – may play an important role in their choice of lender or broker. While none of these characteristics were considered very important by a majority of the borrowers, these characteristics were very important for a sizable minority of consumers:

  • Having an established banking relationship
  • Reputation of the lender/broker
  • Having a local office or branch nearby
  • Recommendation from a real estate agent/home builder


For those consumers who had a tendency to shop, these are the primary characteristics that motivated them:

  • Lender/broker operates online
  • Recommendation from a lending website
  • Reputation of the lender/broker
  • Recommendation from a real estate agent/home builder
  • Recommendation from a friend/relative/co-worker
  • Spoke my primary language, which is not English
  • Having a local office or branch nearby


The bottom line is this… Consumer education on the mortgage lending process is critical for potentially saving thousands of dollars over the life of the loan.

Are Realtors ready to explain the implementation of the 2015 TILA-RESPA Integrated Disclosure Rule to homebuyers?

According to a recent survey conducted by Wells Fargo, the answer is a resounding “No.”

Here’s a primer…
As part of the implementation of the final rules of the Dodd-Frank Act, there will be a combination of various RESPA and TILA regulations to create all-new disclosure documents designed to be more helpful to consumers, while integrating information from existing documents to reduce the overall number of forms.

Implementation of this new rule impacts two processes of the mortgage transaction and affects everyone involved in real estate and goes into effect October 3rd, 2015*. As Realtors are typically the ones who have the first interaction with homebuyers, its important that they are provided with educational resources to clarify the impact these changes will make upon borrowers in their home loan shopping process and with the scheduling of loan closings when the rule’s implementation can potentially require last minute negotiations for sales contract extensions.

Key Features of the Integrated RESPA/TILA forms include:
-When applying for a loan, the new Loan Estimate (LE) document replaces the Truth-in-Lending Disclosure (TIL) and the Good Faith Estimate (GFE).
-At loan closing, the new Closing Disclosure (CD) replaces the Final TIL and HUD-1 Settlement Form.
-Loan applications taken prior to October 2015*, require the use of the traditional GFE & HUD-1. As such, lenders will be telling closing agents for months to come whether to use the HUD-1 or the new CD at loan closing.

In essence, consumers will receive one document instead of two and implementation of the rule will expire the traditional Good Faith Estimate and the HUD-1 Settlement Form for certain loan transactions, but not all. These rules apply to most closed-end consumer mortgages. They do not apply to home equity lines of credit (HELOCs), reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). Oddly enough, for these loans, the old forms will continue to be used which will create a slew of issues for both lenders and settlement agents.

The Consumer Financial Protection Bureau (CFPB) governs implementation of the rules which define a loan application as the collection of these six items: 1) borrower name, 2) borrower Social Security Number, 3) borrower income, 4) property address, 5) estimate of property value, and 6) mortgage amount requested. Once these six items are collected, lenders are not permitted to require other items before issuing a Loan Estimate, as had been allowed previously before issuing TIL disclosures and/or GFEs.

The Loan Estimate
The Loan Estimate (LE) has been designed as a comparison tool intended to provide financial uniformity for borrowers with which to shop different lenders and aims to provide them with a better way to understand the information being given. Uniformity of the LE throughout the marketplace also applies to timing. The LE must be delivered to the borrower within three business days of taking a loan application. No fees can be collected and no Intent To Proceed (ITP) can be requested until an applicant has received the LE much as is required in today’s operating environment with the Good Faith Estimate.

Effects on Implementation and Unintentional Consequences
In the shopping phase of the mortgage lending process, a borrower traditionally expects to collect various pre-application cost estimates to view loan program options and these cost estimates can then be used to compare the same offerings from different lenders. These estimates are non-binding to the lender because they are based on certain assumptions which include:
-credit score
-property type (single-family, condo, PUD, number of units (1-4)
-value of property
-loan amount
-intended occupancy (owner-occupied, second home, investment)
-debt-to-income ratio (DTI) <= 43%
-date and time of pricing request

A fault of the proposed LE is that it doesn’t list all assumptions the lender has made in its calculation of pricing for clarity of comparison from one lender to another.

To provide a pre-application cost estimate, a lender needs only three of the six components that define a loan application – borrower name, estimate of property value and mortgage loan amount requested. Therefore, providing pre-application cost estimates does not trigger the issuance of regulatory disclosures for loan application.

Today, there is no rule in existence that prohibits a lender from issuing of a pre-application cost estimate prior to a borrower making full loan application. After August 2015, again, there is no rule that will prohibit this activity. Post August 2015, a pre-application estimate is prohibited to look like either the new LE or the existing GFE and will need to include specific language that it is not to be considered an LE.

Overall, the Loan Estimate is intended to give consumers more helpful information about the key features, costs and risks of the loan for which they are applying, but here’s the thing… If lenders begin using the LE in place of designing pre-application cost estimates and if their loan operating systems (LOS) have limitations that simultaneously prohibit the issuance of an LE to only instances where all six components of a loan application are received in order to ensure compliance with the timing of the delivery of the LE to the borrower (as they currently do when issuing a Good Faith Estimate [GFE]), then a borrower will essentially have to make application with a lender in order to receive the Loan Estimate– which is then counterintuitive to the partial intent of the LE which is to compare loan options prior to making application.

Additionally, the TILA/RESPA rule prohibits a lender from requiring that supporting documentation be delivered prior to issuing the new Loan Estimate. As such, in most cases, the LE will be issued based on the unverified information that is provided to a mortgage loan originator (MLO). If borrowers unintentionally misrepresent their income, assets, property type or intended occupancy between one lender and another, the LE’s (and/or pre-application cost estimates) received from each lender will invariably produce different pricing.

The Closing Disclosure
The second component of the RESPA/TILA integrations is the Closing Disclosure and is intended to reduce surprises at the closing table regarding the amount of cash borrowers will need to bring to the closing table. The new Closing Disclosure (CD) is a blend of the existing Truth-in-Lending (TIL) disclosure and the Settlement Statement (HUD-1). It’s important to note that the new CD is governed by the Truth-in-Lending Act (TILA), not the Real Estate Settlement Procedures Act (RESPA). TILA provides different accuracy expectations and enforcement provisions than RESPA, as well as some differences in definitions, with associated risks and penalties that are much more severe than RESPA.

The biggest change that will come from the TILA-RESPA Integrated Disclosure Rule is that the borrower must receive the Closing Disclosure at least three business days prior to consummation as opposed to the current one day requirement of delivery for the HUD-1.

TILA defines consummation to be: “The time that a consumer becomes contractually obligated on a credit transaction.” Each lender is left to decide at what point it considers that a borrower has become contractually obligated on a transaction. Although a 3-day right of rescission rule applies when refinancing owner-occupied properties, many lenders are choosing to define the consummation date as the date the borrower signs the loan documents even though technically, the borrower still has three days to rescind the offer.

While its affect is no doubt a positive for all parties, its implementation is creating major challenges for lenders and settlement agents alike. Traditionally, settlement agents prepare the HUD-1 Settlement Statement. In this new environment where lenders are required to show compliance of delivery of the Closing Disclosure to the borrower, there is much debate and concern over who is responsible for the accuracy of the CD. Lenders can only guarantee their fees. Settlement agents are responsible for ensuring all other fees are accurately represented on the closing statement. This marriage of responsibilities is requiring lenders and settlement agents to open better lines of communication much earlier in the process.

RESPA-TILA Integration Details
The new Loan Estimate consists of three pages and the Closing Disclosure consists of five pages.  For borrowers and Realtors, to view the proposed new disclosures, visit the Consumer Financial Protection Bureau (CFPB) homepage and scroll to the Participate tab and then select the dropdown for Mortgages. For lenders, the CFPB has also issued a detailed 96 page explanation of these two new forms which can be viewed online at Guide to the Loan Estimate and Closing Disclosure Forms.


*Updated July 2015 to reflect the CFPB’s decision to delay implementation from August to October 2015.

Real Estate Agents Demand Local Lenders


In an article dated August 22, 2014, Inside Mortgage Trends reports results from the latest Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey to show that real estate agents strongly prefer local lenders and a Florida real estate agent was quoted as suggesting to the seller a requirement for all offers with financing contingencies to go through a local lender.

Agents report that closing delays are more common from a call center lender than from a lender with a local office due to a general lack of responsiveness, underwriting delays, lack of knowledge of local lending laws, and inaccessibility of lender contacts with settlements taking place after hours. When the time requirements of the sales contract are not respected, buyers are at risk of losing their earnest money deposits.

Tom Popik, research director of Campbell Surveys confirms, “Agents crave information and certainty of closing.” A Michigan real estate agent is reported to contact the buyer’s lender for access to information regarding the timeline of the underwriting process and expectations for meeting closing dates. To leverage against delays, he includes a contract addendum leaving his seller’s with “an out after a certain period.”

Selling agents are said to encourage potential buyers to avoid call center lenders altogether or as a safety net, submit a second loan application to a local lender. Additionally, when a listing receives multiple offers, sellers are encouraged by their agents to “shy away from offers financed by a call center lender.”

How can call center lenders do a better job upfront of calming all parties? By issuing true pre-approvals where credit, income, and assets have been reviewed and approved by a decision maker and by communicating clear closing expectations once a property appraisal has been received and reviewed.

Are Cost of Living expenses inhibiting top talent from joining your company?


Big cities want big talent, but recruiting efforts at top universities can reach gridlock when cost of living comes into play.  While you can’t control the cost of housing, there are many ways to leverage the opportunities at your organization beginning with a best-in-class welcoming committee to lead the way.  Your benefits coordinator can enhance the recruiting experience by proactively:

1. Arranging a cost-free package including:

    • Discounted memberships to the opera, museum’s, theatre, and the gym.
    • Rate reductions for insurance, commuter and parking services.
    • Purchase discount programs through retailers such as Apple, AT&T, Hertz, FedEx, Dell and Microsoft

2.  Removing the hurdles. Too many companies make the mistake of blocking solicitations from willing vendors. Make it easy by posting your submittal requirements online and welcome new opportunities. How else will you learn what’s available? An excellent example of this concept is the Employee Perks & Discounts offered at the University of South Florida.

3.  Avoiding exclusivity – It isn’t in your employees best interests to turn away new offerings because an established vendor is asking for exclusivity.  When entering into agreements with banks or credit unions, stipulate that you maintain the option to allow other financial institutions to complement their product offerings with expanded opportunities for your staff.

4.  Research local Mortgage Providers – Know which lenders can provide pre-employment financing with just an offer letter. Know which lenders have reduced down payment requirements for recent graduates. Know which lenders offer loan programs that exclude monthly payments on student loans when calculating debt to income ratio’s.

While opportunities for “No Money Down” mortgages are usually limited to persons earning no more than 80% of the median county income, some lenders offer specialty programs for higher income earners.  National and regional lenders offering low down payment programs with no mortgage insurance to doctors and lawyers are BB&T, Fifth Third Bank, BBVA Compass, Bank of America, Citi Private Bank, SunTrust, and PNC. Each having different program parameters (profession, maximum loan amount, maximum years out of school/residency, minimum credit score, partnership requirements, etc).

If you’re a recent college graduate (<3 years out of school/residency) in any field, and considering your housing options in either Florida, New York, New Jersey or Connecticut, contact me for a free consultation on fixed or adjustable rate loan programs, with just a 10% down payment, up to $2,000,000 with no mortgage insurance requirement. Offer letters allowed. Primary residence purchase only for US residents or permanent residents. Non-permanent residents can inquire about foreign national financing options with a minimum down payment of 30%.