Since 2008, governmental agencies have been actively involved in molding and shaping all aspects of mortgage lending in an effort to protect the borrower. Change affecting the industry is a daily discussion in efforts to remain ahead of the game. The Home Valuation Code of Conduct, AIR policy, RESPA, the Loan Quality Initiative and the SAFE Act have greatly impacted the way all mortgage lenders do business.
While this subject isn't new, we have become more aware of the impact to the borrower, and it's much deeper than a new form, extra paperwork or a quick phone call.
First, and most obvious, is the change toward more protection of the borrower. How? In essence, each of these policies was created with the intention that more regulation would prevent abusive lending practices from happening again. Of course, for those of us who did not participate in such activity to begin with, these policies won't have an effect in that regard. These regulations, however, focus on the process, as we now have an exact regulated way in which each step in the home loan process is made. Each of these steps directly affects the borrower with time and money.
No longer are home loans a quick and easy process. While most companies, including credit unions, have taken every step necessary to streamline their processes and hired numerous staff to handle the increased work, the truth of the matter is each application takes longer for all lenders to process, underwrite and close. For example, the required paper trail when gift funds are used, if disputes exist in the credit report or in how income is allocated are all much more in-depth. Even a refinancing has more stringent requirements and a streamlined loan process no longer exists. Everything is documented. Everything is checked and double-checked.
Another example that went into effect in mid-2011 is the Uniform Mortgage Data Program. It affects how appraisals are conducted and distributed in the home loan process. UMDP creates a universal format in which all appraisers evaluate properties and code the property, called the Uniform Appraisal Dataset, creating uniform standards for all appraisers. This new procedure, again, slows down the home loan process as appraisers themselves learn how to adapt to this new way of appraising and decipher the new system they are required to use.
UMDP is also changing the way an appraisal can be collected and sent to the lender. UMDP is implementing the Uniform Collateral Data Portal for the electronic collection of appraisal data to minimize the impact on lenders. It requires a full-electronic appraisal form, or electronic collection of appraisal data, for all appraisal forms delivered to the agencies.
While UMDP is another way legislation has been created in hopes to fairly and securely impact the home loan process, it contributes to the long list of legislation slowing down and increasing costs for a lender and borrower. We hope that the effects of these new laws help borrowers and the industry with guidelines that will lead to consistency. However, it's at a time-consuming cost that impacts the bottom line.
Matthew Abbink is vice president of direct lending at CU Members Mortgage.
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