Fair Access to Credit Score Disclosures—Coming to a Loan File Near You!

Most mortgage companies don’t realize this yet, but the Fair Access to Credit Score Disclosures are coming to a loan file near you!
We know the Dodd-Frank Wall Street Reform Act is massive—and covers all types of financial entities.

Tucked away in the bill is a section called “Fair Access to Credit Scores” which contains new rules for Adverse Action and Risk Based Pricing notifications.

Be prepared to add another disclosure to your already huge stack of disclosures. The actual form has not yet been created, but stay tuned.

The Risk Based Pricing is took effect January 11, 2011. The new credit score disclosure rules are supposed to become effective July 21, 2011. Here’s how the credit score disclosure and risk based pricing come together to trigger the disclosure.

Under the risk based pricing rule lenders are required to send a notice to any client who is receiving a loan with less than the best rates possible. So, if the best rate out there is for 25% down and a 740 credit score and your clients have neither, you’ll have to send them a credit score disclosure.

When they receive the notice and you may (meaning will) be asked to explain to them why they are paying from .25 pt. to 3.25 pts. extra on their loan.

This time around, the credit reporting agencies must also add certain disclosures when a consumer requests their credit score. Get a copy from your credit supplies of their disclosure because you know your clients will be asking you—not the credit bureaus—what it really means.

Credit scores are going to become more and more available to consumers So my advice is to GET YOUR CLIENTS TO REVIEW THEIR CREDIT BEFORE APPLING FOR A LOAN and start working on your script on how you’re going to explain why they have gotten the disclosure and why have to pay extra fees.
Provided by www.MortgageCurrentcy.com where we interpret the mortgage rules and regulations in plain language.

HVCC Morphs Into Appraiser Independence

HVCC Morphs into Appraiser Independence

Karen Deis. Publisher, www.Mortgage Currentcy.com

The new Appraiser Independence rule and the sunset of HVCC doesn’t change a thing. There are some publications out there stating that the Interim Rule doesn’t prohibit production staff from ordering, paying for, or participating in the appraisal process directly with appraisers – but we’re here to tell you differently. The link to the Federal Reserve gives you access to the actual Federal Register – it states that Lenders are required to ensure Appraiser Independence from production staff – essentially continuing the HVCC rules regarding ordering, payment, & process. Mortgage Brokers, LO’s, & other production staff are prohibited from selecting, influencing, paying, or having substantive communications with appraisers.

Portability – Reps & Warrants are still required for use of another Lender’s appraisal. Since this is now Federal Law and all Lenders will now be adhering to the Appraiser Independence Requirements, the portability should become easier. What was the problem before? Not all Lenders were selling to Fannie and Freddie and therefore did not need to comply with HVCC – since no one could ever guarantee the compliance across the board, the portability of appraisals was just not happening. If you noticed, there was never an issue with appraisal portability for Government Loans – that’s because ALL Lenders played by the same rules with clear guidance from HUD.

Fannie (SEL 2010-14) and Freddie (2010-23) issued their own interpretations—which are basically the same, HOWEVER, Freddie goes into much more detail—with added instructions on how appraisers are supposed to appraisal REO’s and Short Sales. Fannie’s interpretation leaves a lot to be desired! Can you say buy-backs anyone?

Realtors & Builders are not prohibited from having contact with or providing information to the appraiser – they are however prohibited from inappropriate or illegal behavior – coercion, extortion, collusion, compensation, inducement, intimidation, bribery, etc.

Interim Final Rule – the rule is out for comment for 60 days…a few tweaks are likely, but this was developed with all the HVCC problems in mind and all the players having input – I do not expect much will change.