on using the RM to buy new home.
1. Do both the sale and the purchase of the new home need to be done simultaneously?
A. You can sell your home anytime and then purchase a home using a reverse mortgage to finance it at any time. If you do not have a home that you need to sell then you can just show that you do have the money necessary to pay your portion of the purchase and use the reverse mortgage to provide the balance.
You cannot get a home using a reverse mortgage without putting some of your money into the transaction, no seller financing or gifts of the down payment.
2. Assume a home was sold netting $100,000. Money is in money market fund. What value of new home might one look for to finance the new home with RM and the $100K to be the down payment. Assume the youngest buyer is 75. What formula can you use to determine this new home value considering age and down payment as variables.
A. There is no formula we can give you, it must be run on the lender provided software. You can request a quote from us and we will figure it out for you. On the 75 year old asked about they could buy a $300,000 house with $103,000 down payment using the fixed HECM.
Monday, August 31, 2009
Some Good Questions
Sent in from a Loan Officer in GA.
I appreciate this opportunity. I hope I can remember the questions I have but never seem to quite understand.
Some of my questions are as follows:
1. Since the amortization schedule is drawn out to age 85, what happens with the loan anyway if/when the borrower lives past that age?
A. Some of the software we use shows to age 100 and some does not, either way the interest keeps accumulating until the loan is paid off at the time the borrower moves, sells or dies.
2. What is the average time a loan package is in-house before it gets to the lender? Who are the key individuals in the process?
A. WSB processes the loan until it is ready to go to the underwriter at the lender of choice, that normally takes around 2 to 3 weeks at which time we send it to the lender and they determine if there is anything else needed (conditions) if not then we are clear to close in a few days (except MetLife) and the closing takes place.
3. How soon is the loan officer commission paid after the close?
A. WSB pays all payroll each week, our cutoff for receiving checks is Wednesday at Noon Pacific, so if we get the check from the Escrow by Noon Wednesday then we cut your check that day and if you are set up to receive them electronically you will receive it by Friday if you want a paper check we send them UPS on Thursday so it could take up to five days for the East Coast delivery.
4. Why are leads so expensive from WSB? It seems like sales resources are a major income bucket for WSB. Wouldn't it be more lucrative to see as many qualified people as possible, at the lowest cost to the agent? Commercial standard mail is relatively cheap. Recycled documentation is low overhead, etc. How are your rates justified?
A.Postage rates are 44 cents per piece mailed and our leads are $500.00 per 1,000 so I am not sure why you think that is expensive? If you have a vendor that can get a good response for less we want to know about them. WSB is not a mail house or lead company, we search out companies that promise to deliver, we try it ourselves first and then if we get a good result we offer it to our Loan Officers. We just completed a test that cost us $1,600 and we wrote 1 Reverse Mortgage out of that, we will not be recommending that one to you. We have offered lists of prospects for 15 cents per name and have had good results with those and the reply card mailer is working very good, in fact if you get just 30 leads back then each lead cost you $16.00 which is the real number you should pay attention too. The Robert Wagner Leads cost $150.00 each when they were available.
If you know of a lower cost lead generation then we would like to know about it as well, and if you know of one that works prove it with production.
These are just a few of the pressing questions I've had. If I have more, I'll send them.
I hope that answers your questions and to all of our Loan Officers I welcome them, keep them coming.
Jeffrey Bangerter
I appreciate this opportunity. I hope I can remember the questions I have but never seem to quite understand.
Some of my questions are as follows:
1. Since the amortization schedule is drawn out to age 85, what happens with the loan anyway if/when the borrower lives past that age?
A. Some of the software we use shows to age 100 and some does not, either way the interest keeps accumulating until the loan is paid off at the time the borrower moves, sells or dies.
2. What is the average time a loan package is in-house before it gets to the lender? Who are the key individuals in the process?
A. WSB processes the loan until it is ready to go to the underwriter at the lender of choice, that normally takes around 2 to 3 weeks at which time we send it to the lender and they determine if there is anything else needed (conditions) if not then we are clear to close in a few days (except MetLife) and the closing takes place.
3. How soon is the loan officer commission paid after the close?
A. WSB pays all payroll each week, our cutoff for receiving checks is Wednesday at Noon Pacific, so if we get the check from the Escrow by Noon Wednesday then we cut your check that day and if you are set up to receive them electronically you will receive it by Friday if you want a paper check we send them UPS on Thursday so it could take up to five days for the East Coast delivery.
4. Why are leads so expensive from WSB? It seems like sales resources are a major income bucket for WSB. Wouldn't it be more lucrative to see as many qualified people as possible, at the lowest cost to the agent? Commercial standard mail is relatively cheap. Recycled documentation is low overhead, etc. How are your rates justified?
A.Postage rates are 44 cents per piece mailed and our leads are $500.00 per 1,000 so I am not sure why you think that is expensive? If you have a vendor that can get a good response for less we want to know about them. WSB is not a mail house or lead company, we search out companies that promise to deliver, we try it ourselves first and then if we get a good result we offer it to our Loan Officers. We just completed a test that cost us $1,600 and we wrote 1 Reverse Mortgage out of that, we will not be recommending that one to you. We have offered lists of prospects for 15 cents per name and have had good results with those and the reply card mailer is working very good, in fact if you get just 30 leads back then each lead cost you $16.00 which is the real number you should pay attention too. The Robert Wagner Leads cost $150.00 each when they were available.
If you know of a lower cost lead generation then we would like to know about it as well, and if you know of one that works prove it with production.
These are just a few of the pressing questions I've had. If I have more, I'll send them.
I hope that answers your questions and to all of our Loan Officers I welcome them, keep them coming.
Jeffrey Bangerter
Tuesday, August 25, 2009
Honest Selling
With no reservation whatsoever, I can confidently say that 90 percent of all problems with salespeople can be solved if you can just get them to shut up and listen.
I’ve worked with hundreds of salespeople – from rookies to seasoned veterans to entrepreneurs that have started several successful companies – and if there’s one skill set that must be improved every time, it’s listening. If you choose to do only one thing I tell you in this entire book, then learn how to apply the interview concepts I’m about to explain.
Before I get to the concepts of how to interview, I need to get back on my soapbox for a few minutes, so I can explain one key reason why you should interview, and, once again, voice my disdain for much of what I’ve heard about this particular subject.
Decision-makers buy from people they trust. If there is one indisputable law of sales, it’s that, when all else is equal, and most times even when things are unequal, trust is the #1 factor that controls purchase decisions.
I have no way to actually prove this, but it’s an assumption I’m willing to make, simply because I’ve seen what the lack of trust can do to any relationship, whether it be in sales or any other aspect of life. Besides, decision-makers rarely have all the facts when making final decisions – unknowns always remain – so in the final analysis, trust in what a salesperson says is the key that actually locks a deal.
So if trust is essential to the sales process, it stands to reason that salespeople would want to know how to create trust – right?
In an earlier chapter, you learned about supply and demand – that to sell you must offer stuff that people want. Sales trainers know that salespeople want to learn how to establish trust, so most of them offer training in accomplishing that goal.
Throughout my sales career, I’ve read dozens of sales books, taken almost a dozen sales courses and participated in a few one-on-one coaching and mentoring programs. With few exceptions, the experts giving the advice told me about the importance of trust, and then how to establish “strong,” “profound” or “deeply held” trust. The thing I found curious was that all of them claimed their techniques could produce this level of trust in not more than 15 minutes – an astounding accomplishment, and a little outlandish. The only people I have ever trusted deeply are those who behaved in a trustworthy manner over a long period of time. I give new acquaintances, such as salespeople, the benefit of the doubt when it seems they’re being straight with me. But strong, profound and deeply held trust? That never happens in only 15 minutes.
Nevertheless, I listened carefully to what I was told, and even practiced some of the techniques – the ones that weren’t totally outrageous. And, after 25 years of analyzing what others had to say about establishing trust, I’ve managed to finally find the key.
Yes, I’m serious, I’ve actually landed on the one and only way to establish trust. No, I did not invent this idea, nor did I learn it from an expert. But learning from these experts is what gave me the insights I needed to arrive at my conclusions.
Are you ready to learn what it takes to establish deeply held trust with prospects? Are you truly prepared to have this question finally answered? Then brace yourself, because I’m about to give you the secret to this age-old question. [Drumroll please …]
To establish trust, you must behave in a manner that is worthy of trust.
Imagine that! All that is required to establish trust is to be trustworthy! Whew! I’m glad that question is finally answered – aren’t you?
This is taken from the book Honest Selling, I recommend you read it.
I’ve worked with hundreds of salespeople – from rookies to seasoned veterans to entrepreneurs that have started several successful companies – and if there’s one skill set that must be improved every time, it’s listening. If you choose to do only one thing I tell you in this entire book, then learn how to apply the interview concepts I’m about to explain.
Before I get to the concepts of how to interview, I need to get back on my soapbox for a few minutes, so I can explain one key reason why you should interview, and, once again, voice my disdain for much of what I’ve heard about this particular subject.
Decision-makers buy from people they trust. If there is one indisputable law of sales, it’s that, when all else is equal, and most times even when things are unequal, trust is the #1 factor that controls purchase decisions.
I have no way to actually prove this, but it’s an assumption I’m willing to make, simply because I’ve seen what the lack of trust can do to any relationship, whether it be in sales or any other aspect of life. Besides, decision-makers rarely have all the facts when making final decisions – unknowns always remain – so in the final analysis, trust in what a salesperson says is the key that actually locks a deal.
So if trust is essential to the sales process, it stands to reason that salespeople would want to know how to create trust – right?
In an earlier chapter, you learned about supply and demand – that to sell you must offer stuff that people want. Sales trainers know that salespeople want to learn how to establish trust, so most of them offer training in accomplishing that goal.
Throughout my sales career, I’ve read dozens of sales books, taken almost a dozen sales courses and participated in a few one-on-one coaching and mentoring programs. With few exceptions, the experts giving the advice told me about the importance of trust, and then how to establish “strong,” “profound” or “deeply held” trust. The thing I found curious was that all of them claimed their techniques could produce this level of trust in not more than 15 minutes – an astounding accomplishment, and a little outlandish. The only people I have ever trusted deeply are those who behaved in a trustworthy manner over a long period of time. I give new acquaintances, such as salespeople, the benefit of the doubt when it seems they’re being straight with me. But strong, profound and deeply held trust? That never happens in only 15 minutes.
Nevertheless, I listened carefully to what I was told, and even practiced some of the techniques – the ones that weren’t totally outrageous. And, after 25 years of analyzing what others had to say about establishing trust, I’ve managed to finally find the key.
Yes, I’m serious, I’ve actually landed on the one and only way to establish trust. No, I did not invent this idea, nor did I learn it from an expert. But learning from these experts is what gave me the insights I needed to arrive at my conclusions.
Are you ready to learn what it takes to establish deeply held trust with prospects? Are you truly prepared to have this question finally answered? Then brace yourself, because I’m about to give you the secret to this age-old question. [Drumroll please …]
To establish trust, you must behave in a manner that is worthy of trust.
Imagine that! All that is required to establish trust is to be trustworthy! Whew! I’m glad that question is finally answered – aren’t you?
This is taken from the book Honest Selling, I recommend you read it.
Tuesday, August 18, 2009
How to Identify Diminished Capacity
I just finished a requirement of my Broker/Dealer and I thought this part of the course was important for you as Loan Officers of WSB Mortgage to also realize. Please focus on the best interest of our clients and prospects, if it was your Mother or Father, how would you like them treated?
How to Identify Diminished Capacity
A critical aspect of doing business with seniors is being able to identify signs of diminished mental capacity in senior investors. The ability to observe changes in investors' behavior places representatives in a unique and challenging position. There is widespread concern among Financial Professionals and their Firms about taking appropriate steps when an investor shows signs of diminished capacity, about Financial Professionals' responsibilities in these instances, and about their potential liability in instances where the Financial Professional does not address the issue.
Regulators have noted that Financial Professionals cannot take advantage of investors in a manner that would violate either an investment adviser's fiduciary duty to the investor or a representative's responsibility to follow just and equitable principles of trade. Firms have an obligation to supervise employees to prevent this behavior. In circumstances where the investor appears to lack capacity to understand an investment or to provide informed consent, you may want to consider taking certain steps, such as seeking advice from supervisors about contacting a trusted family member or the person designated in the investor's power of attorney.
Experts on the elderly who have studied this subject, as well as regulators as of late, have referred to the importance of identifying signs — or “red flags” — that may indicate that an investor may have diminished capacity or a reduced ability to handle financial decisions. Examples of signs of diminished capacity include, but are not limited to, the following:
• The investor appears unable to process simple concepts;
• The investor appears to have difficulty speaking or communicating;
• The investor appears unable to appreciate the consequences of decisions;
• The investor makes decisions that are inconsistent with his or her current long-term goals or commitments;
• The investor's behavior is erratic;
• The investor refuses to follow appropriate investment advice. This may be of particular concern when the advice is consistent with previously-stated investment objectives;
• The investor appears to be concerned or confused about missing funds in his or her account, where reviews indicate there were no unauthorized money movements or no money movements at all;
• The investor is not aware of, or does not understand, recently completed financial transactions;
• The investor appears to be disoriented with surroundings or social setting; and
• The investor appears uncharacteristically unkempt or forgetful.
How to Identify Elder Financial Abuse
Elder abuse comes in a variety of forms. It can be physical or emotional and can be in the form of neglect, abandonment, or through financial exploitation. Elder financial abuse is generally referred to as the misuse of a person's money or belongings by a family member or a person in a position of trust.
Similar to detecting diminished capacity, representatives are on the front lines of seeing indications of possible financial abuse and would benefit from being able to identify signs — or “red flags” — that may indicate that an investor may be subject to elder abuse. Examples of these signs include, but are not limited to the following:
• The investor gives a power of attorney to someone that, to the investor's Financial Professional, appears inappropriate;
• Indications that the investor does not have control over or access to his/her money;
• The investor's mailing address has been changed to an unfamiliar and unexplained address;
• Inability of the representative to speak directly to the investor, despite attempts to do so;
• The investor appears to be suddenly isolated from friends and family;
• There is a sudden, unexplained or unusual change in the investor's transaction patterns;
• There are unexplained disbursements made in an investor's account that are outside of the norm; and
• The sudden appearance of a new individual involved in the investor's financial affairs.
How to Identify Diminished Capacity
A critical aspect of doing business with seniors is being able to identify signs of diminished mental capacity in senior investors. The ability to observe changes in investors' behavior places representatives in a unique and challenging position. There is widespread concern among Financial Professionals and their Firms about taking appropriate steps when an investor shows signs of diminished capacity, about Financial Professionals' responsibilities in these instances, and about their potential liability in instances where the Financial Professional does not address the issue.
Regulators have noted that Financial Professionals cannot take advantage of investors in a manner that would violate either an investment adviser's fiduciary duty to the investor or a representative's responsibility to follow just and equitable principles of trade. Firms have an obligation to supervise employees to prevent this behavior. In circumstances where the investor appears to lack capacity to understand an investment or to provide informed consent, you may want to consider taking certain steps, such as seeking advice from supervisors about contacting a trusted family member or the person designated in the investor's power of attorney.
Experts on the elderly who have studied this subject, as well as regulators as of late, have referred to the importance of identifying signs — or “red flags” — that may indicate that an investor may have diminished capacity or a reduced ability to handle financial decisions. Examples of signs of diminished capacity include, but are not limited to, the following:
• The investor appears unable to process simple concepts;
• The investor appears to have difficulty speaking or communicating;
• The investor appears unable to appreciate the consequences of decisions;
• The investor makes decisions that are inconsistent with his or her current long-term goals or commitments;
• The investor's behavior is erratic;
• The investor refuses to follow appropriate investment advice. This may be of particular concern when the advice is consistent with previously-stated investment objectives;
• The investor appears to be concerned or confused about missing funds in his or her account, where reviews indicate there were no unauthorized money movements or no money movements at all;
• The investor is not aware of, or does not understand, recently completed financial transactions;
• The investor appears to be disoriented with surroundings or social setting; and
• The investor appears uncharacteristically unkempt or forgetful.
How to Identify Elder Financial Abuse
Elder abuse comes in a variety of forms. It can be physical or emotional and can be in the form of neglect, abandonment, or through financial exploitation. Elder financial abuse is generally referred to as the misuse of a person's money or belongings by a family member or a person in a position of trust.
Similar to detecting diminished capacity, representatives are on the front lines of seeing indications of possible financial abuse and would benefit from being able to identify signs — or “red flags” — that may indicate that an investor may be subject to elder abuse. Examples of these signs include, but are not limited to the following:
• The investor gives a power of attorney to someone that, to the investor's Financial Professional, appears inappropriate;
• Indications that the investor does not have control over or access to his/her money;
• The investor's mailing address has been changed to an unfamiliar and unexplained address;
• Inability of the representative to speak directly to the investor, despite attempts to do so;
• The investor appears to be suddenly isolated from friends and family;
• There is a sudden, unexplained or unusual change in the investor's transaction patterns;
• There are unexplained disbursements made in an investor's account that are outside of the norm; and
• The sudden appearance of a new individual involved in the investor's financial affairs.
Monday, August 17, 2009
Here is a very good article
This is a good article and worth reading.
By John P. Napolitano
GateHouse News Service
Posted Jul 20, 2009 @ 11:30 AM
--------------------------------------------------------------------------------
.Typically used for income during retirement, reverse mortgages are finding their way into the affluent marketplace as a vehicle for advanced planning.
Paul Savery, a reverse mortgage consultant with Wells Fargo Home Mortgage in Sandwich, says some people have used reverse mortgages to buy or improve a second home. With the substantial slide in real estate prices throughout the Sun Belt, some wealthy homeowners are going bargain-hunting with their reverse mortgage line available to quickly close on beautiful second homes being sold by distressed sellers.
Reverse mortgages can be used as an estate-planning tool. When working with retirees about reducing their estates and the subsequent estate tax, retirees are often reluctant to part with their hard-earned cash.
Whether it is fear of running out of money or thinking that they'll spend their way down to an untaxable level for their estate – this reluctance to make gifts is common even for the very wealthy.
The concept is that making gifts reduces your gross estate, which, in turn, will reduce any estate or death taxes that may be due. One of the most utilized techniques with estate reduction gifts is the purchase of life insurance in an irrevocable trust.
This later creates a very large amount of cash from the ultimate death benefit that can be received by beneficiaries both income-and estate-tax free. Using the proceeds from a reverse mortgage to pay life insurance premiums is in effect using double leverage for a very low-risk move. The biggest risk here is the policy itself - make sure that you buy a policy that is guaranteed for life from a highly rated life insurance company.
A similar approach would involve using the proceeds from your reverse mortgage to acquire long-term care insurance. Both the mortgage and the long-term-care insurance may protect your home from long-term illness and health-care costs.
Another creative use comes next year with the repeal of limits for Roth IRA conversions. Making a Roth IRA conversion is an expensive move for current income taxes - but for the wealthy, it is an opportunity to create a financial legacy for the next generation with tax-free Roth IRA assets. The ability to obtain a reverse mortgage could make utilization of the Roth conversion opportunity coming our way for 2010 even sweeter.
John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached at jnap@uswealthcompanies.com. For online discussion and more information, go to www.makingcentsblog.com.
By John P. Napolitano
GateHouse News Service
Posted Jul 20, 2009 @ 11:30 AM
--------------------------------------------------------------------------------
.Typically used for income during retirement, reverse mortgages are finding their way into the affluent marketplace as a vehicle for advanced planning.
Paul Savery, a reverse mortgage consultant with Wells Fargo Home Mortgage in Sandwich, says some people have used reverse mortgages to buy or improve a second home. With the substantial slide in real estate prices throughout the Sun Belt, some wealthy homeowners are going bargain-hunting with their reverse mortgage line available to quickly close on beautiful second homes being sold by distressed sellers.
Reverse mortgages can be used as an estate-planning tool. When working with retirees about reducing their estates and the subsequent estate tax, retirees are often reluctant to part with their hard-earned cash.
Whether it is fear of running out of money or thinking that they'll spend their way down to an untaxable level for their estate – this reluctance to make gifts is common even for the very wealthy.
The concept is that making gifts reduces your gross estate, which, in turn, will reduce any estate or death taxes that may be due. One of the most utilized techniques with estate reduction gifts is the purchase of life insurance in an irrevocable trust.
This later creates a very large amount of cash from the ultimate death benefit that can be received by beneficiaries both income-and estate-tax free. Using the proceeds from a reverse mortgage to pay life insurance premiums is in effect using double leverage for a very low-risk move. The biggest risk here is the policy itself - make sure that you buy a policy that is guaranteed for life from a highly rated life insurance company.
A similar approach would involve using the proceeds from your reverse mortgage to acquire long-term care insurance. Both the mortgage and the long-term-care insurance may protect your home from long-term illness and health-care costs.
Another creative use comes next year with the repeal of limits for Roth IRA conversions. Making a Roth IRA conversion is an expensive move for current income taxes - but for the wealthy, it is an opportunity to create a financial legacy for the next generation with tax-free Roth IRA assets. The ability to obtain a reverse mortgage could make utilization of the Roth conversion opportunity coming our way for 2010 even sweeter.
John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached at jnap@uswealthcompanies.com. For online discussion and more information, go to www.makingcentsblog.com.
The Negative Press is at it again.
This is a TV News program in Southern California and it is negative, but I think it is important that you see the complaints so you can address these issues when you talk to a prospect. We need to make sure they understand how this will look in the future. You will also note that the real complaint is the broker sold her some investment with the money she got from the reverse mortgage, don't do that.
http://abclocal.go.com/kabc/story?section=news/consumer&id=6961766
http://abclocal.go.com/kabc/story?section=news/consumer&id=6961766
Wednesday, August 12, 2009
What's New in Sales - Nothing!
Some people have stuff and want money. Some people have money and want stuff. Occasionally, both parties find each other, communicate and agreed to trade stuff for money. Provided both parties remain happy about the previous trade, they might trade again in the future.
Believe it or not, in those 44 words you learn the bottom line concepts of the six components to sales:
1. Supply and demand - have stuff want money, want stuff have money.
2. Marketing-find each other.
3. Sales-communicate and agreed to trade.
4. Fulfillment-exchange stuff for money.
5. Buyer-seller relationship-both parties remain happy.
6. Repeat-business generation-trade again in the future.
Just like there is nothing new in sales, there is also no silver bullet sales system that makes all salespeople successful. It doesn't exist, it never has existed and never will exist, because it's not the system that creates success-it’s the person.
You are the only person keeping you from achieving success at sales. And you are the only person who can change that. I can tell you how. Other experts can tell you how. But only you can make it happen.
To become the best-sales person possible, you must assume full and complete responsibility for your success. That means that the only person you ever blame for failure or congratulate for success is the person looking back at you in the mirror. All top salespeople assume total responsibility for their successes and failures, and none of them used the words I can’t. Because they all know the key to success lies within the words. I can and I will.
The above was taken from Honest Selling by Gill Wagner
Believe it or not, in those 44 words you learn the bottom line concepts of the six components to sales:
1. Supply and demand - have stuff want money, want stuff have money.
2. Marketing-find each other.
3. Sales-communicate and agreed to trade.
4. Fulfillment-exchange stuff for money.
5. Buyer-seller relationship-both parties remain happy.
6. Repeat-business generation-trade again in the future.
Just like there is nothing new in sales, there is also no silver bullet sales system that makes all salespeople successful. It doesn't exist, it never has existed and never will exist, because it's not the system that creates success-it’s the person.
You are the only person keeping you from achieving success at sales. And you are the only person who can change that. I can tell you how. Other experts can tell you how. But only you can make it happen.
To become the best-sales person possible, you must assume full and complete responsibility for your success. That means that the only person you ever blame for failure or congratulate for success is the person looking back at you in the mirror. All top salespeople assume total responsibility for their successes and failures, and none of them used the words I can’t. Because they all know the key to success lies within the words. I can and I will.
The above was taken from Honest Selling by Gill Wagner
Tuesday, August 4, 2009
Common Questions Under MDIA/TILA Amendments
American Bankers Association:
Common Questions Under MDIA/TILA Amendments
For the benefit of our Members, ABA is issuing the following set of FAQs relating to the recent amendments to the Truth in Lending Act, as published in by Federal Register Notice (74 FR 23289) on May 19, 2009. The new requirements will become effective on July 30, 2009.
The following item represent the more common questions posed by ABA members. ABA offers this guidance for purposes of general information only, and does not intend anything contained herein to be used or referenced as legal advice.
--------------------------------------------------------------------------------
In a situation where the applicant is floating the rate, do we have to redisclose each time there is a rate movement?
No. Creditors are not required to redisclose every time there is a market shift. Rather, the creditor would wait until consummation, and then reach the determination of whether to redisclose. Generally, lenders are required to redisclose (and follow the three-day waiting period) prior to closing when the annual percentage rate that will be offered to the borrower at closing is off by more than 1/8 of 1% from the initial disclosure given to the borrower. Interim changes in market interest rates and fees need not be disclosed to the borrower.
What risk do banks face for allowing waivers of the waiting periods before consummation?
The sole waiver expressly authorized by the Federal Reserve Board (Board) is a waiver of the post closing three business day waiting period prior to disbursement in a refinance transaction when the borrowers will lose their primary residence before the waiting period expires due to expiration of a mortgage foreclosure redemption period. Other waivers must meet the standard of constituting a "bona fide personal financial emergency," as per comment 19(a)(3)-1. No further specific example is set forth under the final rules. The Board specifically warns that "waivers should not be used routinely to expedite consummation for reasons of convenience." 74 FR 23296. Without further guidance from the Board, banks will therefore face considerable uncertainty, and the risk the potential for regulatory violations and court action about whether the waiver was appropriate or properly executed.
Does the Board allow banks to consider e-mailing the corrected TILA disclosures as a faster method of delivery? Do the new rules require the bank to follow the waiting periods regardless of the delivery method, i.e., fax mail; email etc.?
If a creditor places corrected disclosures in the mail, the consumer is deemed to receive the corrected disclosures three business days after they are mailed. Creditors that use e-mail may (but are not required to) follow that approach. Creditors may instead rely on actual proof of receipt of the disclosure to begin the counting of the required waiting period. For example, if a creditor provides disclosures through e-mail, the creditor may presume that the consumer receives the disclosures three business days after they are e-mailed, OR, if a creditor delivers corrected disclosures electronically (consistent with the E–Sign Act), the creditor may rely on evidence of actual delivery (such as documentation that the mortgage loan disclosure was delivered by e-mail, if documentation is available) to determine when the three-business-day waiting period begins.
Under the new redisclosure requirements, is the TIL form the only disclosure that needs to be redisclosed, or do any other disclosures need to be sent to borrower?
This rule amends TILA, and only TIL-related disclosures are affected. No other corrected disclosure form is required to be delivered to the consumer upon redisclosure. (Note, however, that if you add or change a variable rate feature to a residential mortgage loan, the ARM loan disclosures required by Section 19 of Regulation Z must be provided as soon as possible. Likewise, changing loan programs will trigger a requirement to provide a new GFE disclosure under rules effective in January, 2010.)
Please clarify, in instances where the loan is a "brokered" transaction, does the GFE/TIL have to come from the lender, or would the disclosures provided by the broker suffice?
The creditor, not the mortgage broker, is responsible for providing TILA disclosures. See the comment 3 to Section 19(b) of Regulation Z. Banks should not rely on the broker to provide disclosures for on behalf of the institution (unless the broker is a captive entity described in Comment 19(b)-3). In short, banks should provide their own disclosures regardless of what the independent mortgage broker does.
If the APR decreases before consummation, and it decreases by more than allowed by tolerance, is the lender required to redisclose and wait an additional three days to close?
The result of ABA discussions with Board staff supports the following analysis. However, there continues to be some disagreement among industry members, so ABA will seek written guidance on this subject.
The final rules sets forth that in instances where the disclosed APR overstates the actual APR, the corrected disclosures are not required where the APR previously disclosed is considered accurate under the tolerances in § 226.22. See 74 FR 23293; § 19(a)(2)(ii)-1. Under § 226.22, over-disclosures shall be treated as accurate (therefore voiding the need to issue corrected disclosures) if the finance charge is greater than the amount required to be disclosed. Specifically, section 226.22(a)(4) (which is a section that was not affected by the MDIA final rule) states that the APR is accurate if (i) disclosed APR "results from" disclosed finance charge; and (ii) the disclosed finance charge is accurate under 226.18(d)(1). Section 226.18(d)(1)(ii) (also unaffected by the MDIA final rule) provides that a finance charge shall be treated as accurate if it is greater than the amount required to be disclosed.
As ABA has consistently advised, however, that the new regulations do not sanction a pattern and practice of over-disclosures as an allowable means of avoiding the redisclosure requirements under 19(a)(2)(ii). Rather, creditors must structure their systems to arrive to accurate APR figures, and in the specific instances that they over-disclose, such over-disclosures may be considered accurate by following the rules of elements outlined under § 226.22.
Please clarify how the waiting periods are measured differently for initial disclosures as opposed to re-disclosures.
On the initial disclosures, the seven-business day waiting period before consummation begins when the creditor delivers or places the early disclosures in the mail, NOT when the consumer receives them. On re-disclosures, consummation may not occur until three business days after the consumer receives the corrected disclosure (either by evidence or presumed delivery). In terms of imposing fees, however, the lender may impose fees three business days after mailing the initial disclosures, unless the lender can prove that the disclosures were received earlier. If the disclosures are delivered to the borrower face-to-face, the creditor can impose a fee when the disclosures are handed over to the borrower. The same rule applies to faxes, FedEx and email – if lender can prove the borrower received the disclosure before the three business days expires, lender may impose a fee at the time of delivery of the disclosure.
Is there anything expressly written in the new regulations that prohibit the practice of obtaining pre-authorized credit card information and not processing the charge until the required timeframe to collect a fee has passed in accordance with the MDIA?
The MDIA regulations prohibit the imposition of fees prior to the borrower's receipt of estimated TILA disclosures. Even if the borrower agrees to have his credit card charged, many legal experts that we have spoken with are interpreting the rule so that obtaining pre-authorized credit cards would be deemed to be "imposing a fee" (whether or not it is paid later). Although there is no express regulatory language prohibiting the practice, current thinking suggests that this practice poses significant risk of regulatory violation and/or litigation.
Does an application taken for a property address that is "To Be Determined" count as a "complete application" under the new regulations? Is "To Be Determined" a valid property address for purposes of triggering the new TILA early disclosure requirements?
The term application under TILA is defined by Section 2 of HUD's Regulation X (RESPA), which states that the application is a submission of a borrower's financial information in anticipation of a credit decision. 24 CFR 3500.2(b). Until January 1, 2010, Regulation X provides that if a submission does not state or identify a specific property, the submission is an application for a prequalification and not an application under Regulation X. Since changes to the RESPA regulations are now finalized, and further clarifications are pending, ABA recommends that banks stay alert to HUD pronouncements on this issue.
Can you clarify whether the MDIA rules apply to construction loans?
The Board regulations state that the MDIA early disclosures apply to a mortgage transaction subject to the Real Estate Settlement Procedures Act (RESPA) that is secured by the consumer's dwelling (other than a home equity line of credit or mortgage loan secured by a time share). See § 226.19(a)(1)(i). RESPA applies broadly, but does not apply to "temporary financing such as a construction loan." That exemption is explained in the RESPA regulations (24 C.F.R. 3500.2), which sets forth:
"The exemption for temporary financing does not apply to a loan made to finance construction of one- to four-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user. If a lender issues a commitment for permanent financing, with or without conditions, the loan is covered. Any construction loan for new or rehabilitated one- to four-family residential property, other than a loan to a bona fide builder (a person who regularly constructs one- to four-family residential structures for sale or lease), is subject to RESPA if its term is for two years or more. A "bridge loan" or "swing loan" in which a lender takes a security interest in otherwise covered one- to four-family residential property is not covered by RESPA."
Who must receive the disclosures under the new TILA requirements?
The answer depends on whether the loan is a rescindable transaction. In accordance with 226.17(d), if there is more than one borrower, the disclosures may be made to any borrower who is primarily liable on the obligation. However, if the transaction is rescindable, the disclosures must be made to each person who has the right to rescind.
Can mortgage brokers collect upfront fees, or do MDIA restrictions apply to creditors and brokers alike?
Under the new MDIA-TILA regulations, no creditor or other person may impose a fee on a loan applicant in connection with a mortgage loan application before the applicant receives the early disclosures. Disclosures are considered "received" 3 full business days after mailing or after evidence of delivery, such as return receipt or if delivery is done in person. (The only exception is the credit report fee which can be collected at application.)
Do the new regulation's disclosure "wait periods" begin when the mortgage broker provides disclosures or when the lender issues the applicable disclosures?
The new disclosure wait periods, both for initial disclosures as well as re-disclosure, begin when the "creditor" issues (by mail, electronically, or in person) the disclosures to the borrower. The requirement to disclose and the related "wait periods" will depend on whether the mortgage broker is considered a "legal agent" (i.e. acting on behalf) of the creditor. If the broker is not acting on behalf of the creditor, compliance with the new disclosures and related requirements would be required.
Can the loan be locked at the time of application?
Yes, so long as no fees are imposed or collected. The only restriction under the new regulation is that the no fees, other than a bona fide and reasonable fee to obtain a credit report, may be charged before the delivery of the initial disclosures. Remember that "delivery" requires actual delivery, evidence of delivery, or the 3-business day "mail" presumption as defined by the rule.
Common Questions Under MDIA/TILA Amendments
For the benefit of our Members, ABA is issuing the following set of FAQs relating to the recent amendments to the Truth in Lending Act, as published in by Federal Register Notice (74 FR 23289) on May 19, 2009. The new requirements will become effective on July 30, 2009.
The following item represent the more common questions posed by ABA members. ABA offers this guidance for purposes of general information only, and does not intend anything contained herein to be used or referenced as legal advice.
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In a situation where the applicant is floating the rate, do we have to redisclose each time there is a rate movement?
No. Creditors are not required to redisclose every time there is a market shift. Rather, the creditor would wait until consummation, and then reach the determination of whether to redisclose. Generally, lenders are required to redisclose (and follow the three-day waiting period) prior to closing when the annual percentage rate that will be offered to the borrower at closing is off by more than 1/8 of 1% from the initial disclosure given to the borrower. Interim changes in market interest rates and fees need not be disclosed to the borrower.
What risk do banks face for allowing waivers of the waiting periods before consummation?
The sole waiver expressly authorized by the Federal Reserve Board (Board) is a waiver of the post closing three business day waiting period prior to disbursement in a refinance transaction when the borrowers will lose their primary residence before the waiting period expires due to expiration of a mortgage foreclosure redemption period. Other waivers must meet the standard of constituting a "bona fide personal financial emergency," as per comment 19(a)(3)-1. No further specific example is set forth under the final rules. The Board specifically warns that "waivers should not be used routinely to expedite consummation for reasons of convenience." 74 FR 23296. Without further guidance from the Board, banks will therefore face considerable uncertainty, and the risk the potential for regulatory violations and court action about whether the waiver was appropriate or properly executed.
Does the Board allow banks to consider e-mailing the corrected TILA disclosures as a faster method of delivery? Do the new rules require the bank to follow the waiting periods regardless of the delivery method, i.e., fax mail; email etc.?
If a creditor places corrected disclosures in the mail, the consumer is deemed to receive the corrected disclosures three business days after they are mailed. Creditors that use e-mail may (but are not required to) follow that approach. Creditors may instead rely on actual proof of receipt of the disclosure to begin the counting of the required waiting period. For example, if a creditor provides disclosures through e-mail, the creditor may presume that the consumer receives the disclosures three business days after they are e-mailed, OR, if a creditor delivers corrected disclosures electronically (consistent with the E–Sign Act), the creditor may rely on evidence of actual delivery (such as documentation that the mortgage loan disclosure was delivered by e-mail, if documentation is available) to determine when the three-business-day waiting period begins.
Under the new redisclosure requirements, is the TIL form the only disclosure that needs to be redisclosed, or do any other disclosures need to be sent to borrower?
This rule amends TILA, and only TIL-related disclosures are affected. No other corrected disclosure form is required to be delivered to the consumer upon redisclosure. (Note, however, that if you add or change a variable rate feature to a residential mortgage loan, the ARM loan disclosures required by Section 19 of Regulation Z must be provided as soon as possible. Likewise, changing loan programs will trigger a requirement to provide a new GFE disclosure under rules effective in January, 2010.)
Please clarify, in instances where the loan is a "brokered" transaction, does the GFE/TIL have to come from the lender, or would the disclosures provided by the broker suffice?
The creditor, not the mortgage broker, is responsible for providing TILA disclosures. See the comment 3 to Section 19(b) of Regulation Z. Banks should not rely on the broker to provide disclosures for on behalf of the institution (unless the broker is a captive entity described in Comment 19(b)-3). In short, banks should provide their own disclosures regardless of what the independent mortgage broker does.
If the APR decreases before consummation, and it decreases by more than allowed by tolerance, is the lender required to redisclose and wait an additional three days to close?
The result of ABA discussions with Board staff supports the following analysis. However, there continues to be some disagreement among industry members, so ABA will seek written guidance on this subject.
The final rules sets forth that in instances where the disclosed APR overstates the actual APR, the corrected disclosures are not required where the APR previously disclosed is considered accurate under the tolerances in § 226.22. See 74 FR 23293; § 19(a)(2)(ii)-1. Under § 226.22, over-disclosures shall be treated as accurate (therefore voiding the need to issue corrected disclosures) if the finance charge is greater than the amount required to be disclosed. Specifically, section 226.22(a)(4) (which is a section that was not affected by the MDIA final rule) states that the APR is accurate if (i) disclosed APR "results from" disclosed finance charge; and (ii) the disclosed finance charge is accurate under 226.18(d)(1). Section 226.18(d)(1)(ii) (also unaffected by the MDIA final rule) provides that a finance charge shall be treated as accurate if it is greater than the amount required to be disclosed.
As ABA has consistently advised, however, that the new regulations do not sanction a pattern and practice of over-disclosures as an allowable means of avoiding the redisclosure requirements under 19(a)(2)(ii). Rather, creditors must structure their systems to arrive to accurate APR figures, and in the specific instances that they over-disclose, such over-disclosures may be considered accurate by following the rules of elements outlined under § 226.22.
Please clarify how the waiting periods are measured differently for initial disclosures as opposed to re-disclosures.
On the initial disclosures, the seven-business day waiting period before consummation begins when the creditor delivers or places the early disclosures in the mail, NOT when the consumer receives them. On re-disclosures, consummation may not occur until three business days after the consumer receives the corrected disclosure (either by evidence or presumed delivery). In terms of imposing fees, however, the lender may impose fees three business days after mailing the initial disclosures, unless the lender can prove that the disclosures were received earlier. If the disclosures are delivered to the borrower face-to-face, the creditor can impose a fee when the disclosures are handed over to the borrower. The same rule applies to faxes, FedEx and email – if lender can prove the borrower received the disclosure before the three business days expires, lender may impose a fee at the time of delivery of the disclosure.
Is there anything expressly written in the new regulations that prohibit the practice of obtaining pre-authorized credit card information and not processing the charge until the required timeframe to collect a fee has passed in accordance with the MDIA?
The MDIA regulations prohibit the imposition of fees prior to the borrower's receipt of estimated TILA disclosures. Even if the borrower agrees to have his credit card charged, many legal experts that we have spoken with are interpreting the rule so that obtaining pre-authorized credit cards would be deemed to be "imposing a fee" (whether or not it is paid later). Although there is no express regulatory language prohibiting the practice, current thinking suggests that this practice poses significant risk of regulatory violation and/or litigation.
Does an application taken for a property address that is "To Be Determined" count as a "complete application" under the new regulations? Is "To Be Determined" a valid property address for purposes of triggering the new TILA early disclosure requirements?
The term application under TILA is defined by Section 2 of HUD's Regulation X (RESPA), which states that the application is a submission of a borrower's financial information in anticipation of a credit decision. 24 CFR 3500.2(b). Until January 1, 2010, Regulation X provides that if a submission does not state or identify a specific property, the submission is an application for a prequalification and not an application under Regulation X. Since changes to the RESPA regulations are now finalized, and further clarifications are pending, ABA recommends that banks stay alert to HUD pronouncements on this issue.
Can you clarify whether the MDIA rules apply to construction loans?
The Board regulations state that the MDIA early disclosures apply to a mortgage transaction subject to the Real Estate Settlement Procedures Act (RESPA) that is secured by the consumer's dwelling (other than a home equity line of credit or mortgage loan secured by a time share). See § 226.19(a)(1)(i). RESPA applies broadly, but does not apply to "temporary financing such as a construction loan." That exemption is explained in the RESPA regulations (24 C.F.R. 3500.2), which sets forth:
"The exemption for temporary financing does not apply to a loan made to finance construction of one- to four-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user. If a lender issues a commitment for permanent financing, with or without conditions, the loan is covered. Any construction loan for new or rehabilitated one- to four-family residential property, other than a loan to a bona fide builder (a person who regularly constructs one- to four-family residential structures for sale or lease), is subject to RESPA if its term is for two years or more. A "bridge loan" or "swing loan" in which a lender takes a security interest in otherwise covered one- to four-family residential property is not covered by RESPA."
Who must receive the disclosures under the new TILA requirements?
The answer depends on whether the loan is a rescindable transaction. In accordance with 226.17(d), if there is more than one borrower, the disclosures may be made to any borrower who is primarily liable on the obligation. However, if the transaction is rescindable, the disclosures must be made to each person who has the right to rescind.
Can mortgage brokers collect upfront fees, or do MDIA restrictions apply to creditors and brokers alike?
Under the new MDIA-TILA regulations, no creditor or other person may impose a fee on a loan applicant in connection with a mortgage loan application before the applicant receives the early disclosures. Disclosures are considered "received" 3 full business days after mailing or after evidence of delivery, such as return receipt or if delivery is done in person. (The only exception is the credit report fee which can be collected at application.)
Do the new regulation's disclosure "wait periods" begin when the mortgage broker provides disclosures or when the lender issues the applicable disclosures?
The new disclosure wait periods, both for initial disclosures as well as re-disclosure, begin when the "creditor" issues (by mail, electronically, or in person) the disclosures to the borrower. The requirement to disclose and the related "wait periods" will depend on whether the mortgage broker is considered a "legal agent" (i.e. acting on behalf) of the creditor. If the broker is not acting on behalf of the creditor, compliance with the new disclosures and related requirements would be required.
Can the loan be locked at the time of application?
Yes, so long as no fees are imposed or collected. The only restriction under the new regulation is that the no fees, other than a bona fide and reasonable fee to obtain a credit report, may be charged before the delivery of the initial disclosures. Remember that "delivery" requires actual delivery, evidence of delivery, or the 3-business day "mail" presumption as defined by the rule.
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