Dodd Frank Three Weeks Later

House in the daylight
Image by UltimateLibrarian via Flickr

I’m starting to feel a bit obsessive or maybe even compulsive over these new regulations.  Before I know it, I’m going to be washing my hands feverishly every ten minutes.  Or maybe I’ll start turning my light switch on/off/on/off/on/off all day.  That would certainly kill productivity and drive my co-workers completely nuts.  Regardless of any affliction imaginary or otherwise, I find myself once again reflecting on previous weeks and experiences in this “new world.”

I’ve now had the chance to work on a variety of scenarios for consumers and business partners alike amidst the new regulations and it’s admittedly not too terribly different from what it was a few weeks ago.  Our biggest challenge in the industry is still finding ways to obtain financing for qualified applicants and to help guide them through the process of successfully completing a mortgage transaction.  At the same time, there are a few things I have noticed that may be potential issues in the coming months.

It’s common for a Realtor to ask for an estimate of closing costs associated with a transaction so that a purchase offer can be written correctly.  It’s probably one of the most common things Loan Officers are asked at the beginning of a loan process and it’s a very important detail.  In this post Dodd-Frank world; however, it has become a bit more of a challenge to provide an accurate calculation. 

Interest rates vary from day-to-day and sometimes when the market is volatile rates will even change throughout the day.  You can normally tell when the market is in a state of flux by the Loan Officers themselves; if you find yours curled up in the fetal position underneath their desk you know it’s a particularly bad day.  Volatility makes us crazy.

In this new world, we Loan Officers no longer have control over the prices that we quote.  And, each investor is priced differently.  Since pricing is changing daily and each price quote is based on the current market, it’s become a real challenge to give an accurate estimate of closing costs at the beginning of a transaction.

When a Realtor negotiates with a seller to have closing costs paid, they normally do so before a rate has been locked in.  In other words, most transactions are negotiated based on an estimate of costs that is only accurate for a day at most.  Inevitably, the costs a consumer will pay for closing costs will be either higher or lower than the initial estimate once a rate is locked in.  If the rate is less expensive than initially estimated, the consumer may not use all of the seller credit.  If the rate ends up being higher than the initial estimate the consumer may be short funds to close at the closing table.  Neither situation is ideal, to say the least.

I will say one thing:  Dodd Frank is keeping us all on our toes.  I’ll try to leave the light switches alone.


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