Attorneys At Law

Attorneys practicing in and around the Chicagoland area. Experienced in the practice areas of Real Estate Law, Mortgage Foreclosure Defense Litigation, Social Security Disability, Business Law, & Estate Law.

Attorneys At Law - Attorneys practicing in and around the Chicagoland area. Experienced in the practice areas of Real Estate Law, Mortgage Foreclosure Defense Litigation, Social Security Disability, Business Law, & Estate Law.

Credit Score Changes Help Consumers and Worry Lenders

Credit Score

An upcoming change to the way credit scores are calculated will likely benefit millions of consumers but also has others who depend on scores to calculate risk worried.

Starting July 1, 2017, the three primary credit bureaus will be implementing a new change in the type of information they collect to determine credit scores.

According to the Consumer Data Industry Association, (the industry group representing credit reporting bureaus), they plan to stop collecting and reporting most tax liens and civil judgments from people’s credit scores by roughly July 1.

This type of information has negative impacts on credit scores and previously remained in credit files for extended periods.

Tax liens are levied against properties when an owner is delinquent on payment of property taxes. Civil judgments are orders by courts in legal disputes, such as a creditor taking a borrower to court over an unpaid debt.

How does this impact consumers?

mortgage rates going up after presidential electionThe plan to stop collecting and reporting civil judgments and tax lien information currently on public records will affect millions of consumers.

VantageScore Solutions, the credit scoring developer created by the three credit bureaus, estimated that 8 percent of consumers would see an average score increase of 10 points if all civil judgments and tax liens were removed from credit reports.

Ten points may seem small but in the mortgage industry that could affect a significant number of applicants.

This could result in as many as 12 million Americans appearing to be more creditworthy after the changes occur.

According to the Consumer Financial Protection Bureau, the largest single source of all overdue debt on credit reports is from unpaid medical expenses. Much of this debt is eventually paid late by insurance companies. The delays caused administrative and billing processes on the part of insurance companies often end up negatively impacting consumer credit scores.

Because of this change, consumers may save money in lower interest rates caused by insurance companies paying bills late.

How does this impact lenders?

It is feared by many within the industry that these changes may make risky buyers appear more creditworthy than they actually are.

The president and CEO of the Mortgage Bankers Association David H. Stevens has said that with tax lien and civil judgment information removed from credit reports, “it’s unclear whether creditors will be able to make informed decisions” about loan applicants.

According to Tim Coyle of LexisNexis Risk Solutions, an internal study by his firm showed that borrowers with a civil judgment or a tax lien are 5.5 times more likely to end up in serious default or foreclosure.

How these changes affect you depends on whether you work in the mortgage industry or on the content of your individual credit report. We will have to wait and see how lenders will adapt to the elimination of this information from the scores they use.


Related Information:

New credit policy: Good for consumers, worrisome for lenders – Chicago Tribune

3 Big Changes To Credit Scores That Will Impact Your Wallet – Forbes

CFPB Spotlights Concerns with Medical Debt Collection and Reporting – Consumer Financial Protection Bureau

This Regulatory Change Means a Credit Score Boost for 12 Million Americans – The Motley Fool


* Advertising Material: To the extent that the information in this post is interpreted as attorney advertising in accordance with the Illinois Rules of Professional Conduct or within the meaning of state bar rules from all other localities, this statement is made pursuant to those rules.

Specialties: Specialization claims are prohibited by Illinois Supreme Court Rules and we do not claim to be specialists. The content of this e-mail is organized and presented for the sole purpose of general information. None of the included content should be construed as legal advice. Viewing this e-mail or e-mailing the account holder does not create an attorney-client relationship. NOTICE: This page may be considered advertising material.


The Law Offices of Lora Fausett P.C. provides real estate law attorney services including buying & selling assistancemortgage foreclosure defense, and short sales.

For Information Call 630-858-0090


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President Trump Suspends Mortgage Fee Rate Cuts

On his first day in office, President Donald Trump signed an executive order reversing a recently passed Obama administration policy that reduced the fee rate for Federal Housing Administration backed loans.

What is the change?

The administration canceled a reduction in the Federal Housing Administration’s annual fee for most borrowers.

The cut passed during the final days of the Obama administration would have reduced the annual premium for someone borrowing $200,000 by $500 in the first year.

When the fee rate policy change was announced by Obama’s Housing and Urban Development secretary Julian Castro in January, it was criticized by Donald Trump and Republicans.

What are the fees for?

The premiums fund the Mutual Mortgage Insurance Fund, which bails out lenders if borrowers default on their mortgages. Republicans argued the fee reductions put taxpayers at risk by lowering the funds the FHA has to deal with mortgage defaults.

FHA mortgage loan fees were raised during the housing recession to cover program losses. The Obama policy cutting them would have returned them to almost to the level they were before the housing bubble burst in 2008.

A letter from HUD to lenders and the real estate industry announced they would “suspend indefinitely” the rate reduction, stating “more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.”

What was the response to the change?

The responses to the Trump administration policy were mixed.

Senate minority leader Chuck Schumer denounced the move, while the nominee for Secretary of HUD Ben Carson criticized the new policy when it was implemented by the outgoing administration.

Some housing industry groups approved of the change, saying it would increase home buying by offsetting recent rises in mortgage rates.

Other critics included the President of the National Community Reinvestment Coalition, John Taylor, who asked through a spokesman: “Exactly how does raising the cost of buying a home help average people?”

President of the National Association of Realtors, William E. Brown, said the fee rate cuts would have allowed more people to qualify for a mortgage because it would allow them to meet the debt-to-income ratio required for borrowing money.

The mortgage rate fee hikes were originally implemented during the Obama administration when FHA was under severe stress because of the financial crisis. In 2013 the agency was bailed out by the for $1.7 billion after a huge wave of mortgage defaults.

What does it mean?

In their letter to the real estate industry, HUD stated that “FHA is committed to ensuring its mortgage insurance programs remains viable and effective in the long term for all parties involved, especially our taxpayers.”

With this recent policy change, potential home buyers and the real estate industry will need to wait and see what the effects on the housing market will be.


* Advertising Material: To the extent that the information in this e-mail is interpreted as attorney advertising in accordance with the Illinois Rules of Professional Conduct or within the meaning of state bar rules from all other localities, this statement is made pursuant to those rules.

Specialties: Specialization claims are prohibited by Illinois Supreme Court Rules and we do not claim to be specialists. The content of this e-mail is organized and presented for the sole purpose of general information. None of the included content should be construed as legal advice. Viewing this e-mail or e-mailing the account holder does not create an attorney-client relationship. NOTICE: This page may be considered advertising material.


The Law Offices of Lora Fausett P.C. provide real estate law attorney services including short sales and deeds in lieuloan modifications and workouts, and buying & selling assistance.

For Information Call 630-858-0090


Sources:

Trump Reverses Obama’s Mortgage Fee Cuts on First Day – Bloomberg

Trump’s first executive action: Cancel Obama’s mortgage premium cuts – USA Today

Trump’s Mortgage Fee Cut Reversal: What it Really Means for House-Hunters – Fox Business

HUD Official Website

Changes to Wells Fargo Loans and The Borrower Closing Disclosure

Changes are coming to the Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act and the Truth In Lending Act. These changes will be effective August 2015, and Wells Fargo is working to meet internal compliance and regulator expectations by controlling the generation and delivery of the borrower Closing Disclosure (CD).

These new changes may prompt questions about the rules and how they affect Wells Fargo and individual loans. Some frequently asked questions are answered below.

Will all lenders collaborate on a standard and consistent process for meeting all of the TILA-RESPA Integrated Disclosure Rules?

No.

Each lender is accountable for compliance and must determine its own method for achieving compliance.

Wells Fargo made an operational decision in September regarding our method for achieving compliance and we continue to build processes to support our approach.

Can we begin using the new CD form earlier than August 1, 2015?

No.

In fact, there will be several weeks/months that we will be required to use the previous disclosures with some loans and the new LE and CD on other loans*.

·        Applications prior to August 1, 2015 will use the previous GFE, initial TIL, final TIL and HUD-1.

·        Applications taken on or after August 1, 2015 will use the new Loan Estimate (LE) and CD.

There are no exceptions to this requirement – early use of the LE and CD are not allowed.

*Note: The new disclosures do not apply for home equity lines of credit, mortgages securing mobile homes that are not attached to real estate or for creditors who make five or fewer loans per year.

Can settlement agents prepare the CD and send it to the lender for approval, just as today for the HUD-1?

No – not for Wells Fargo loans.

Lenders are accountable for compliance, which includes the CD timing and accuracy. The new CD is governed by the Truth-in-Lending Act (TILA), not the Real Estate Settlement Procedures Act (RESPA).

TILA and RESPA have different accuracy expectations and enforcement provisions, as well as differences in definitions. The risks and penalties for Wells Fargo are more severe with TILA than RESPA.

How will Wells Fargo determine the exact fees that are applicable on loans?

Collaboration and input from our settlement agents on fees applicable for each transaction continues to be critical.

Wells Fargo will continue to work closely with settlement agents to determine the fees and other content required on the CD. This interaction must occur earlier in the process than is typical today.

How will Wells Fargo determine buyer/seller pro-rated amounts on purchase transactions?

Just as today with the HUD-1, we will work closely with our settlement agents to determine the amounts to be disclosed on the borrower CD.

The settlement agent will be responsible for the seller CD.

The TILA-RESPA Integrated Disclosure Rule uses the term “consummation” – what does that mean?

The TILA-RESPA Integrated Disclosure Rule requires that the borrower receive the CD at least three business days prior to consummation.

TILA defines consummation to be: “The time that a consumer becomes contractually obligated on a credit transaction.”

Wells Fargo considers consummation to be the date the borrowers will sign the note for all transactions (becomes contractually obligated), including transactions in escrow states.

What happens if the pre-closing walk through identifies a change to the buyer/seller agreement that will impact the CD?

The settlement agent must notify the lender’s closing contact if there are any changes that impact the CD. Wells Fargo will determine if an updated CD can be provided for delivery at the closing or if the change triggers the three-day receipt requirement to be restarted.

Will Wells Fargo assume the responsibility for disbursing loan proceeds?

No.

The settlement agent is critical and continues to be responsible for executing the closing including document signing, notarization, disbursement of funds, document recordation and delivery of final documents post-closing.

What education and training materials can we expect?

Specific Wells Fargo training plans are under construction in collaboration with other industry partners such as ALTA, title underwriters and other service providers. Plans include many educational communications and an information guide.

More details will be provided as available.

Contact us with any additional questions or to learn more.