Real Estate
Legislative Good Times Roll - part II
By Dan Smith

Legislative Good Times   part 2

            After my article last month, I had a couple people ask me if there was anything good about all the new rules and regulations coming out. I guess I have been so frustrated with the political response to this point, that I haven’t highlighted what I do believe will be positive outcomes from all this new legislation. It has just been very difficult to watch the same politicians that drove the horses out of the barn over the last decade, rush to show how fast they can close that barn door now that all the horses are gone. But there are some things happening that I think will benefit consumers and the industry moving forward.

            First and foremost Colorado will have licensing for mortgage originators very soon. As of January 1, 2008, the current mortgage originator registration will convert to a license. But by January of 2009, that will also require that the mortgage originator pass a test. So while it won’t really be meaningful until 2009, I think that is a big plus for Colorado, which was one of only two remaining states that did have any licensing requirements at all. Now some Realtors I know have pointed out that licensing is no guaranty of keeping dirtballs out of the business. That’s certainly true. However my answer to them is to imagine what shape the Realtor community would be in, if you could become a Realtor by simply declaring yourself to be one. I think you get the picture.

            Along with licensing, mortgage originators will also be required to carry Errors and Omissions insurance. That is positive for the consumer because prior to this, even if you got abused by a mortgage originator, suing them might have been no more fruitful than trying to bleed a turnip. As of January 31, 2008, mortgage originators will need to carry coverage of up to $100,000 per claim.

            There are also three new disclosures that every consumer will be required to sign. The “Tangible Net Benefit” form is interesting because it still allows for the notion that an Option ARM could actually be shown to have a benefit, in comparison with any other product you could have qualified for. Since I disagree strongly with that notion, I will look forward to the first time someone sues a lender for setting him or her up with this awful product. There is also a compensation form for lenders to fill out, so you will now know something about your lender’s income. This is really useless for the most part though, because a lender’s compensation really doesn’t matter if they are giving you the best rate and fees. So the Good Faith Estimate is still your best bet for comparison shopping. Finally there is also a “Lock-in Disclosure” that confirms what program, rate and points your loan is locked in at. This should greatly reduce the incidence of “bait and switch” pricing some lenders have engaged in. So that is a plus for consumers too!

            The big downer for the consumer here is that all these new rules exclude mortgage originators who work for banks like Wells Fargo, Countrywide, Washington Mutual and the like. So if you can’t pass a test, aren’t insurable against fraud, or like to engage in “bait and switch” pricing - you can still work for any of these places. I guess bankers just had better or worse lobbyists, depending on your point of view?

            For expert advice on this or any aspect of home finance, call the professional. Dan Smith can be reached at 303-674-0201 or visit him on the web at www.ColoradoHomeLoans.com anytime.