Bridge loans, an invaluable tool when moving to a new home, are becoming less prevalent. With unemployment reaching levels not seen since the 1930's, lenders becoming more strict with the guidelines, and some incomes in decline, more people than ever are not able to qualify for bridge loans.
This is a a millstone around the neck of realtors. When potential home buyers can't carry a bridge loan while they're in the process of selling one home and buying another, they're stuck having to stay in their existing home until they can qualify.
This is a vicious circle: the bad economy is keeping people from buying new homes, and the slow market for home sales is keeping the economy depressed.
It's tempting to suggest that requirements for bridge loans be relaxed so that home sales can be stimulated. The problem with relaxing standards, though, is that we would wind up right back where we started with the collapse of the sub-prime mortgage market, when people who were not qualified for mortgages got them anyway.
It might not be a bad idea for congress to consider a way to guarantee bridge loans if the borrower is within certain limits, and the length of the loan is limited to just a few months.
If we're going to see the housing market really turn, it's going to require that home buyers be able to purchase new homes while they try to sell their existing homes. There's just no other way. This isn't just a problem for mortgage brokers and realtors in Indiana, it's a problem for everyone from California to Maryland.
Tuesday, July 21, 2009
Wednesday, June 17, 2009
Indiana Mortgage Legislation
2008 saw mortgage-related laws in Indiana revised to protect consumers from unscrupulous lenders and brokers.
A significant change in the law removes a licensing exemption from state law for Indiana mortgage lenders who deal in loans backed by certain federal agencies. Lenders affected are those who sell or service mortgages for the Federal National Mortgage Association or the Federal Home Loan Mortgage Association, a person who issues securities backed by the Government National Mortgage Association, a person who makes loans insured by the Department of Housing and Urban Development or the Department of Agriculture Rural Housing Service, a person who acts as a supervised lender for the Department of Veterans Affairs, or a person who acts as a correspondent of loans insured by the Department of Housing and Urban Development. Anyone dealing with such loans must now be licensed with the state of Indiana Securities Division or the Department of Financial Institutions.
Additionally, the law requires any licensed real estate brokers or salesperson to also be licensed as above if the person renders loan related services.
The law now requires Indiana mortgage lenders to submit fingerprints for a national criminal background check by the FBI. This includes owners, directors managers or officers of a loan broker or a loan broker license applicant.
Indiana mortgage lenders will now face strict requirements for the protection of personal information. Personal information includes Social Security numbers, driver's license numbers, state identification card numbers, credit card numbers, financial account numbers, addresses, phone numbers, income information, credit history, credit score, assets, liabilities or employment history.
All of this information must not be disposed of by brokers or lenders without either being encrypted (if in electronic form) or by being shredded, burned, mutilated or erased.
The restrictions on use of personal information also apply to anyone who is involved with a lender or broker.
Another section of the law prohibits Indiana mortgage lenders from receiving any funds if the lender knows that the funds were generated from a fraudulent act, or for the lender to file a document that the lender knows to contain a misstatement or untrue statement, or if the document omits a statement of material fact.
Mortgage brokers who were licensed prior to July 1st of 2007 will now be required to have a registered principal manager for the principal office location and each branch location that services mortgages. Managers must have at least three years of experience in the loan brokerage or financial services business.
The law also sets forth education requirements for mortgage lenders and brokers, as well as standards for continuing education.
Lastly, the law requires that all principle managers and loan originators be employees of licensed brokers. No longer may brokers be independent contractors.
Indiana mortgage lenders will now face a higher level of scrutiny and be held to higher standards, all because of the acts of rogue operators in the past. Lenders in Indiana are not alone, though. Maryland mortgage lenders, along with lenders in several other states, are now working under new rules.
A significant change in the law removes a licensing exemption from state law for Indiana mortgage lenders who deal in loans backed by certain federal agencies. Lenders affected are those who sell or service mortgages for the Federal National Mortgage Association or the Federal Home Loan Mortgage Association, a person who issues securities backed by the Government National Mortgage Association, a person who makes loans insured by the Department of Housing and Urban Development or the Department of Agriculture Rural Housing Service, a person who acts as a supervised lender for the Department of Veterans Affairs, or a person who acts as a correspondent of loans insured by the Department of Housing and Urban Development. Anyone dealing with such loans must now be licensed with the state of Indiana Securities Division or the Department of Financial Institutions.
Additionally, the law requires any licensed real estate brokers or salesperson to also be licensed as above if the person renders loan related services.
The law now requires Indiana mortgage lenders to submit fingerprints for a national criminal background check by the FBI. This includes owners, directors managers or officers of a loan broker or a loan broker license applicant.
Indiana mortgage lenders will now face strict requirements for the protection of personal information. Personal information includes Social Security numbers, driver's license numbers, state identification card numbers, credit card numbers, financial account numbers, addresses, phone numbers, income information, credit history, credit score, assets, liabilities or employment history.
All of this information must not be disposed of by brokers or lenders without either being encrypted (if in electronic form) or by being shredded, burned, mutilated or erased.
The restrictions on use of personal information also apply to anyone who is involved with a lender or broker.
Another section of the law prohibits Indiana mortgage lenders from receiving any funds if the lender knows that the funds were generated from a fraudulent act, or for the lender to file a document that the lender knows to contain a misstatement or untrue statement, or if the document omits a statement of material fact.
Mortgage brokers who were licensed prior to July 1st of 2007 will now be required to have a registered principal manager for the principal office location and each branch location that services mortgages. Managers must have at least three years of experience in the loan brokerage or financial services business.
The law also sets forth education requirements for mortgage lenders and brokers, as well as standards for continuing education.
Lastly, the law requires that all principle managers and loan originators be employees of licensed brokers. No longer may brokers be independent contractors.
Indiana mortgage lenders will now face a higher level of scrutiny and be held to higher standards, all because of the acts of rogue operators in the past. Lenders in Indiana are not alone, though. Maryland mortgage lenders, along with lenders in several other states, are now working under new rules.
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