Archive for August, 2009

MDIA Not Much Change For Ethical Lenders…

Wednesday, August 5th, 2009

   The new Mortgage Disclosure Improvement Act (MDIA) promulgated by the federal government is not much of a change for lenders who were ethical and disclosed costs initially;  but for those unscrupulous lenders who performed “bait and switch” during the home buying heyday, lamentations are rampant.

   “The purpose of the new Mortgage Disclosure Improvement Act is to insure buyers are fully aware of closing costs and interest rates which they will be charged on their mortgage loan,” said Courtney Walker, Vice President of Nova Home Loans.  “They don’t get to the closing table and are surprised by the numbers”, Walker continued.

   Within three days of applying for a loan, a full cost disclosure must be given to the applicant.  The cost disclosure must be given before any fees are collected, with the exception of any fee charged for pulling the consumer’s credit report, according to the amendment to Regulation Z, Truth in Lending.  Closing cannot take place for seven days unless specifically requested for an emergency.

   In the heyday, reputable lenders provided cost estimate sheets for their clients with the closing costs and loan costs spelled out, including the interest rate.  Good Realtors helped clients by providing clients with names of honest lenders and kept an eye on closing costs, making sure there were no pre payment penalties or other charges unless the client understood the terms of the loan. 

   This legislation comes as a result of the numbers of people who said they did not understand the terms of their loan and the loan costs, such as the option arm loans or the first 80% fixed rate loan with an adjustable rate for the second loan. 

    “The point of the MDIA is that whenever closing costs or interest rates change, the APR reflects these changes in the closing costs and interest rate.”  Walker gave the following example:  A person is offered a fixed rate and the APR is stated, and then offered a 2% rate with a $10,000 up front charge.  How does that person know which loan to choose?  “How are they going to compare an apple with an orange?  The APR will help do that”, Walker said.

   Under the new legislation, if the APR moves 1/8 of a point either up or down, the lender must redisclose to the client “to insure that the buyer is fully aware”.  The borrower must be given a reasonable amount of time to review the new numbers.   “The buyer must receive, review and acknowledge in writing the new disclosure”  and if the new numbers are not approved, then the buyer must change courses. 

    Escrow fees are included in the APR so it is important that the Title Company named in the buyer contract documents is not changed.  Title companies in the Phoenix area charge different rates than the title companies here in Tucson.  For people purchasing foreclosure or short sale properties, any costs the buyer pays, such as allowable seller closing costs, must be included in the APR. 

    If the market moves tremendously, and interest rates go down, redisclosure is mandated, even if to the borrower’s advantage.  Lenders cannot collect upfront fees from borrowers at the time of application.   These include appraisal fees and lock in fees. 

    Lock in fees are relatively new and are similar to earnest money, Walker said.  The purpose of up front lock in fees is because investors (of the loans which the borrower is applying) are beginning to penalize lenders for not delivering on loans for which borrowers apply.  This is often due to borrowers shopping rates.  “Time, money, and effort is put into getting a loan approved” Walker said, and the lock in fee shows good faith on the part of the borrower.  The fee is remitted at the close of escrow as a credit on the closing statement.

    The new requirements do not add time to the loan process, Walker said.  “Nova underwrites locally, draws the docs locally, and funds from its own money,” she added.  “Even with FHA and VA loans, we have basically a 30 day turn around time”.

    Some lenders are recommending a 45 day closing time, so that if a contract is written August 1, closing should be stated September 15.    A Realtor who works closely with the lender is your best advisor, knowing the turn around times of lenders is even more important, and it underscores the need to use local lenders.


Nova Home Loans

Federal Reserve Board Press Release

Federal Register:

Plan Ahead If Thinking About Buying in Tucson…

Tuesday, August 4th, 2009

     Many out of town people come to Tucson with the idea of purchasing property.  In today’s real estate market, they can cherry pick amongst bargain properties.  But now, with new requirements set forth by lending institutions and the federal government, a little planning goes a long way.

    From the comfort of one’s home in Anytown, USA, a future Tucson resident can use the websites provided by local lenders to apply for home loans.   It should be emphasized, local lenders, regardless of where you are moving, are the people who know and understand the quirks of the marketplace.   If  applying for a loan in Tucson, the lender in upstate New York has no idea what our market conditions are, nor should he/she be expected to know.  Conversely, a lender in Tucson does not know the market in upstate New York.  

    Many of the lenders advertised on television or the internet do not know the local market.  They sit in a huge room with a computer screen and sometimes the borrower does not even talk with the same person twice.  This may not be true for all internet and lenders advertised on television, but real estate agents have a bevy of horror stories because these lenders do not know or understand Arizona law.

    Using local lenders, (three are provided below) and talking with a Realtor who can make initial contact with these lenders, will get you the very best service.  A pre approval and  LSR (Loan Status Report) for the Realtor prior to looking at property, will insure the buyer of being able to make an offer without delay.

    A LSR is required for all offers.  This tells the seller and the seller’s agent, that the buyer has been preapproved for the loan requested and that the buyer has talked with a lender and provided the lender initial data requested.  Unless financial conditions dramatically change, the buyer should be able to consumate the transaction.  The purpose of the LSR is to prevent people from making offers on properties, (and tying up properties from future potential buyers) , which the original buyer cannot afford.

    While in the armchair comfort of home, the newcomer to Tucson can determine what documents will be needed by the lender and can either fax or mail copies of those documents.   Being pre approved streamlines the entire process, and in a market where interest rates jump from day to day, or from morning the afternoon, plus the new lending requirements regarding time frames and disclosures by lenders to the borrower, the soon to be new Tucson resident, sits in the cat bird’s seat.


Lance Dickson Nova Home Loans

Tom Heath

Jerry Sundt



Observations from a Client’s Perspective…He Who Hesitates Loses

Monday, August 3rd, 2009

   We have been working for a few weeks now trying to determine what type of property to purchase…single family, duplex, home with a guest house…for an investment property.   Trying to sort out what is most advantageous for a new investor is not always easy since there are so many things to consider. 

   What area?

   What type of property?  A property= high end;  B property=middle of the road; or C property= lower end.

    What price range?

    Who is the audience to whom the rental is targeted?

    Laying the appropriate groundwork is paramount to success; understanding the accounting when one owns rental property; understanding the advantages of a 1031 tax deferred exchange;  deciding whether to form an LLC,  all are important considerations.   This means talking with professionals; the accountant, the facilitator for information, and possibly an attorney.  Formulating some type of long term plan with short term goals so we are all on the same page regarding the map to success comes next.

   But in the meantime, we have been looking at various types of property to familiarize my client with the maket.  There seemed to be plenty of potential candidates for purchase on the market a month or so ago, but suddenly, she said, everything she liked has a contract on it.

   The real estate market is definitely stirring.  Properties priced correctly and which show well are not languishing on the market as they were a few months ago.   Second homes and retirement homes are showing signs of life.  Adding steam to the market is Tucson’s AARP designation as the number one place to live which is both an affordable and desirable retirement area.

    Real estate prices are still low, interest rates remain below 6%, and although requirements for loans have tightened somewhat, money is available.  People are putting their homes on the market, there still is an abundance of short sales and foreclosure properties, and savy investors are purchasing properties on the steps of the courthouse.

   A good cross section of housing is available and Tucson remains a buyer’s market.   It is time to scoop up there bargains because this market will not last.   It always boils down to supply and demand.  

   If you are thinking Tucson, now is the time to act.  Use a local lender who knows and understands our market here, and a good Realtor who listens to your needs and wants.  Take a look at my web site to garner information which will help you as well as provide the opportunity to input your own criteria and see what is out there, and if you don’t have a Realtor now, contact me.  I am always willing to help! 

   Take the comments of my client seriously…”all the good properties suddenly have contracts on them!”


Lance Dickson –  Nova Home Loans –

Tom Heath – The Heath Team   –

Jerry Sundt – VIP Mortgage

Realtor:    Terry Bishop