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At what time will the reviews take place in the lending process, and how will it affect the loans under consideration? This will vary with different lenders and their policies. All appraisals for mortgage loans will have a pre-closing appraisal review, performed by a qualified appraiser. Some of the reviews will be more formal than others. I consider a formal review to be either a desk review or a field review on a form for that purpose. The appraiser signs these appraisal reviews in the same way as they were by the original appraiser. Once performed, they may support or disagree with the original appraiser’s findings and opinions. In the case of a disagreement, the original appraisal will either be repaired or rejected, depending upon the severity of the problem within the appraisal. In some cases, the review appraiser will conclude that the actual property value is different than the value stated in the original appraisal, and the loan will either be modified or cancelled. Others will also use the tool as a postclosing, quality control instrument to ferret out appraisers not up to the tasks. These appraisers will be removed from the approved list of the lender if found to be turning out substandard work. In cases of pre-closing appraisal reviews, we can expect over time to see that all appraisals are reviewed by quali-

fied state-certified appraisers. Some of these may not be formal review appraisals on every loan, but where appraisals do not pass the smell test, either formal desk reviews or field reviews will be performed prior to closing. This, which is perhaps the most significant point to be made, will be done in an effort for the lender and its staff to distance themselves from pressuring or influencing the appraiser. In summary and conclusion, we can expect to see more appraisal scrutiny on all loans. Certified appraisers in the form of appraisal reviews will perform this oversight. Loans, which may have been made in the past, will not pass muster, in some cases, due to this stricter monitoring. In general, more emphasis will be placed upon insuring that the appraisal is unbiased, legitimate and accurate. For loan officers and other stakeholders, who believe that appraisal reviews reduce the probability that a loan will close, appraisal reviews, in some cases, will improve the probability of a closing. The review is a search for the true value of a property, whether it be higher or lower than that claimed in the initial appraisal. Charlie W. Elliott Jr., MAI, SRA, is president of Elliott & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889, e-mail charlie@elliottco.com or visit his company’s Web site, www.appraisalsanywhere.com.

SEPTEMBER 2010 

MISSOURI MORTGAGE PROFESSIONAL MAGAZINE

 NationalMortgageProfessional.com

SEEKING ACTIVE MORTGAGE BANK FOR ACQUISITION I have a client that is actively looking to purchase a Mortgage Bank licensed in at least, New Jersey, New York, and Pennsylvania. The requirements we have include a low FHA “Compare Ratio,” minimum of two existing warehouse lines in good standing, and at least three correspondent lender relationships that are also in good standing, with at least one being an “A” Tier investor. Must have full eagle. The owner/partner will need to be able to stay on until the change of control is completed for quality control purposes. There will be compensation paid during that time frame. There will be a quality control workflow to insure low exposure. Our management team is in place to make it a seamless transition. We would also consider merging our management team with the existing management team if the situation is right. We will use our net-worth to secure the warehouse lines when the change of control is complete. We are very open and willing to hear any situations, business plans, offers, etc. Please email me at todierna@ctcsettlement.com with a good time to discuss this, or call me anytime at (631) 835-0000. I look forward to hearing from you. Very truly yours, Tricia A. Odierna, Esq.

LAW OFFICE OF TRICIA A. ODIERNA 2150 JOSHUA’S PATH, SUITE 202 HAUPPAUGE, NY 11788

Are You Really SAFE From Predatory Mortgage Originators? By Lawrence Fried

Since the passage of the Secure and Fair Mortgage Regulators (AARMR), which will Enforcement for Mortgage Licensing Act establish and maintain a Nationwide of 2008 (SAFE Act), states and governing Mortgage Licensing System and Registry agencies have been scrambling to enact (NMLS). The U.S. Department of Housing new laws and amend existing proce- & Urban Development (HUD) then has dures that facilitate the licensing of the ultimate oversight in determining mortgage loan originators in order to compliance and is responsible for ensurmeet the requirements of this new fed- ing that SAFE Act standards are met. At the surface, there are several proberal law. lems already apparent in defining and The SAFE Act has, in fact, had many benefits. For example, it has put a stop enforcing this Act. While painstakingly to the easy entrance/easy exit loan attempting to define a “loan originator,” originator (now, it’s just easy exit). This various forms of lending institutions and should help ensure that the industry agencies, and what a mortgage loan itself is, the Act goes on to disattracts more qualified cuss what a loan originator and ethical individuals, must now do in order to rather than someone just conduct business. In addilooking for a fast buck tion to current state licenswhen mortgages are in ing requirements, a loan high demand. originator must have a Unfortunately, while background check perenacted with the best formed, which includes intentions to protect the fingerprinting, the pulling consumer and to mitigate of a credit report, and a fraud, and ultimately to criminal history profile. assist in the recovery of Furthermore, approved the housing market, the educational courses and act has also created con“Considering that fusion for mortgage pro- between six and seven tests must be taken and passed. Even a minimum fessionals while engenmillion loans are net worth must be met or dering skepticism that it originated every year, a surety bond posted. will adequately protect this added amount against deceptive lending comes to an extra $15 A measure of practices.

A brief history

in pure cost for every loan. So, who will underwrite this cost?”

The SAFE Act arose out of the economic crisis that began in 2007. The Housing and Economic Recovery Act of 2008 (HERA) was put together quickly with the intent of mitigating the root causes of the crisis, and to implement sweeping reform over what many felt were longstanding problems in the real estate, lending and banking industries. These problems, critics assert, contributed to the boom and subsequent bust in the housing market, with its falling home prices, rising foreclosure rates and volumes of bad debt. The stated objective of the legislation was to “enhance consumer protection and reduce fraud.” This, in turn, seemed to imply that illegal or unethical practices on the part of mortgage originators were to be blamed for at least part of the industry’s troubles. Enter Title V of HERA, the SAFE Act which, in essence, establishes the requirement to build and maintain a national registry of individuals who are engaged in originating loans on residential properties.1 The legislation holds that each state is responsible for complying with the SAFE Act standards. They are to be assisted in this by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential

protection, but at what cost?

Let’s now look at what the estimated potential cost of implementing the SAFE Act might be. Assuming $50 for fingerprints, $150 in educational classes, $300 in registration fees, and $20 for a credit report, that sums up to $520 for every individual who wants to be a loan originator. With an excess of 100,000 individuals (a conservative estimate, based on figures from the Mortgage Bankers Association) who will be subject to these rules, you can see that the price tag facing the industry for these requirements approaches $100 million. And since the bulk of these fees are recurring costs, the Act represents $100 million annually in additional costs. Considering that between six and seven million loans are originated every year, this added amount comes to an extra $15 in pure cost for every loan. So, who will underwrite this cost? Ostensibly, the loan originator (or his or her company) is on the hook for these fees as a result of the legislation. However, basic economics and past precedents indicate that this increase will be passed along to the consumer, resulting in a higher cost continued on page 24

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