The government has continued to put more degrees of separation between the appraisal and mortgage industry. Mortgage companies are required to hire third party appraisal companies who in turn farm the business out to local appraisers without knowledge of who ordered the appraisal. The lender initially does not know who is performing the appraisal. Lenders sign affidavits that they did not have direct contact with or attempt to influence the appraiser in any manner. Appraisers sign affidavits that they were not contacted by the lender or influenced in any manner. This translates to a slower appraisal process.

Lenders now have there own appraisal review departments to review the quality of the appraisers work. Another speed bump on the road to loan approval and a closing the mortgage.

The government now requires lenders to wait until the borrower signs the lenders Good Faith Estimate and Truth In Lending disclosures before an appraisal may be ordered. Lenders no longer allow the mortgage loan officer (the point of contact with the consumer) to generate these compliance documents. There is a one to two day delay to get these documents into the consumer's hands and again, the appraisal can no longer be ordered until they are returned.

The government simplified and standardized the Good Faith Estimate to appear the same regardless of lender. To simplify the process for the consumer the new RESPA law does NOT allow a lender to break down a line by line itemization of closing costs. The closing costs are now summarized as "lender fees" and "other fees" which would be third party fees such as appraisal, credit report, flood certification, tax service, title fees, transfer taxes, and recording fees.

In the short first 20 days of this young year I have had over a dozen requests for a line by line itemization of the fees, and my industry may no longer provide that which has the capacity to raise confusion.

The bottom line is the new RESPA laws are intended to protect the consumer against inflated appraisals and loan related fees, however they are adding time to he approval and funding process.

Where as two years ago we could close loans in 3 to 10 days, and 10 to 30 days last year, I am advising buyers, sellers, realtors, and attorneys to allow 40 days for loan approval and an additional 10 to close for a total of 50 days. Can and will we close some loans sooner? Yes. Will some loans take longer for a variety of reasons? Yes. We still need to live these new RESPA law changes to know them. However, I believe it is prudent to give more space for the speed bumps the government has instituted for the consumers protection.  

Another strong piece of advice I have for the home buyer is to discuss what the various closing costs, prepaid items, liquid documented cash for loan approval, and cash needed at closing will be and what can shape those numbers. Consumers armed with this knowledge during the pre-approval / home searching phase will confidently sign and return compliance documents required for the lender to order the appraisal much faster. That in turn will ensure a faster approval and closing.

My last piece of advice is for the consumer to provide the lender with all of the documents needed for final loan approval up-front during the pre-approval stage. Potential issues can be identified and ironed out much quicker leading to a smoother and faster loan approval process as well. I have seen many a consumer shocked to discover what mortgage lenders require which is actually dictated by the secondary mortgage market - Fannie Mae, Freddie Mac, and Ginnie Mae. Get started now, and happy home hunting!

Jack Jones, Mortgage Consultant
MetLife Home Loans
Cell (630) 901-9844
Efax (866) 304-0161