Yay! New Regulatory Crap!

NOW we’ll fix the housing mess!  No, my friends, no.

Regulations that go into effect August 1 make quick closings impossible and will do nothing whatever to stop future foreclosures.  They involve waiting 3 days from the initial disclosure to order the appraisal, followed by a mandatory 3 day waiting period from final disclosure to the close.  This adds at least 6 business days to the loan process and will make only one thing happen: more fraud.  That’s it.  It won’t help the borrowers, and it won’t help the sellers, and it won’t help any of the other people involved, myself least of all.  This raft of foreclosures is supposed to make it so people understand better what they’re doing at the closing table, so they don’t default on their loans as often.

Cue maniacal laughter here.

I’m telling you that less than 1% of foreclosures are because the people getting the loans didn’t know what they were doing.  Effectively all the foreclosures in the US are because of the following, in descending order of virulence:

  1. The house is upside down and it makes financial sense for the borrower to walk
  2. The borrower lost his job
  3. The borrower got overleveraged in multiple properties, which he now cannot sell
  4. The loan adjusted and the new payment is out of reach

Those are the reasons people are being foreclosed on.  The only possible group that might have been unaware of what they were doing is the last one, and I can tell you from front-line experience, these people DID know what they were doing, they just miscalculated the risks and got bit.  There’s not one thing – not ONE – in this entire piece of legislation (HERA, for those interested, named for the Greek goddess of jealousy and micromanagement) that makes consumers safer or better off.

Let me emphasize something here: I already did all the stuff that HERA tells me to do.  My clients are all told the first time we sign disclosures that if we have agreed on a deal, whatever we agreed to at the beginning will be what we get at the end.  I urge all my clients to bring their original Good Faith Estimates to the table when they close, and if they don’t, I do.  I go through the whole thing line by line.  None of this new legislation makes me a better loan officer, it just makes me slower at it.


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