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Now that TRID ("Truth­in­Lending Integrated Disclosure") has been implemented, all of us who are in the real estate/lending business are working to comply with the rules relating to TRID, the rules established by CFPB ("Consumer Finance Protection Bureau," the federal agency policing compliance, Bulletin 2013­2), and, for closing attorneys, the rules, policies, and procedures required in order to be compliant with ALTA Best Practices, which are the standards set for attorneys who wish to undertake the best methods, policies, andprocedures to protect the Borrowers’ (the "Consumers") privacy and to best represent their clients’ ("Lenders/Creditors") best interests. As all of you who are in the real estate business have been told at the many seminars you have attended, the closing attorney ("settlement agent") is a representative ("third party vendor") of the lender, and the lender is now responsible for all of the actions of the closing attorney/settlement agent. Because each lender has their own compliance officer(s) who interpret the new law and set their own company policies and procedures, there continues to be much confusion and inconsistencies in many areas of the closing ("consummation") process.

On August 15, 2013, the Federal Housing Administration (FHA) relaxed its three (3) year waiting period on foreclosures and other “economic events” which would have heretofore prevented a borrower from qualifying for a loan for the purchase of a primary residence.   For FHA case numbers assigned on or after August 15, 2013, a homebuyer with prior credit problems can apply for an FHA insured mortgage loan. 

 

Mortgage insurance, which is required on all FHA loans, is provided by homebuyers in order to insure the lender against  a loss resulting from  a foreclosure.  For more information regarding FHA mortgage insurance and other requirements relating to FHA loans, please see my prior blog articles.  FHA mortgage insurance is generally available for any loan which is made by an approved FHA lender  and meets minimum standards of the FHA Mortgage Guidelines. 

In 2000, Andrew Cuomo, the then serving Secretary of Housing and Urban Development, announced that Borrowers with FHA loans would be able to cancel their mortgage insurance “just like conventional markets” once reaching a 22% equity (a 78% loan to value at the time of the origination ratio). Prior to 2000, mortgage insurance on FHA loans was paid during the entire term of the loan. Unfortunately, on June 3, 2013, most FHA loans will once again require that mortgage insurance be paid for the life of the loan. The automatic cancellation of the mortgage insurance premium will be rescinded and any mortgage with a loan to value ratio of greater that 90% at the time of the origination (a HUGE MAJORITY of FHA loans), will now require that the mortgage insurance be paid for the life of the loan. FHA loans with a loan to value ratio of 90% or less (10% equity or more) will require the payment of mortgage insurance for 11 years, irrespective of the equity the homeowner builds through prepayments to principal. These new rules apply to all applications received on April 1, 2013; therefore, a Buyer seeking an FHA loan must have his or her application in place on March 31, 2013, in order to avoid the new rules.

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What is a short sale?  A short sale is a pre-foreclosure sale of a person’s  home,  in which the home is sold for less than the payoff on the mortgage, leaving an unpaid balance.  If your lender approves the sale, the home may be sold, the mortgage released,  and the proceeds from the sale applied to the mortgage balance.   These transactions must be approved by the lender and the process has been, in times past, very laborious and time consuming, with most lenders being less than cooperative.

reQuireUnbeknownst to most homeowners is that our country has experienced a huge problem with lenders failing to release or satisfy mortgages, home equity lines of credit, and UCC-1 Financing Statements. Under the provisions of Code of Alabama, Section 35-10-30 , a lender has 30 days following the receipt of a payoff and a written demand to satisfy the mortgage. Unfortunately, many lenders fail to properly record these releases or they mail them to the customer/borrower for recording, and few customers understand that the Release and Satisfaction must be recorded in order to clear the mortgage from their title. Under the law, it is the responsibility of the lender to satisfy the mortgage and NOT the homeowner/borrower, but it is very common for lenders to mail Releases to borrowers.

wireI recently bought a house and the closing attorney is insisting that we wire the amount we owe at closing, even though the contract says that we can provide a cashier’s check. Is this really necessary and why? What is the big deal?

PatientProtectionActThe answer to that question is yes…BUT. The Patient Protection Affordable Care Act, better known as Obamacare, does place a 3.8% tax on investment income, which includes unearned income from capital investments, sometimes referred to as capital gains. However, the tax only applies to individuals with “other income” in excess of $200,000.00 and married couples with combined income in excess of $250,000.00 AND only on the “profit” in excess of $250,000.00 for an individual and $500,000.00 for a married couple.

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From our offices in Decatur, Alabama, we represent clients in Morgan, Madison, Cullman, Lawrence, and Limestone Counties, including the communities of Decatur, Huntsville, Madison, Hartselle, Cullman, and Athens.

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