There are a lot of articles and summaries of the Dodd-Frank law and most of them seem to be written by academic types that make it difficult to understand by the everyday consumer and agent(like me).  The law is intended to protect consumers from preditory lending that helped kill the housing market.  There also provisions aimed directly at banks, bailouts and the like.  However, much of that language is intended for lawyer types and don’t affect the everyday consumer day to day.

There are a few things to note if you are buying or selling real estate.  There is much confusion in a lot of this and I am sure there will continue to be tweaks and different interpretations.  One of the first ones to address is the risk factor that lenders are now required to expose themselves to.  This is an area that, to be honest, I do not have a firm grasp.  Having said that, I will try to give a brief explanation.   Basically if a lender is going to make a loan that is risky (supposedly a loan where less than 20% is put down by a buyer), the originating lender has to retain 5% of loan amount  to help mitigate any defaults.  The question becomes (1.  Where is the 5% coming from, 2.  Will the lender even make a loan to someone without 20% down).  Both these by definition affect the buyers pocketbook!  One caveat to this and something that makes it even more confusing, Dodd-Frank also has provisions and/or rules that affect how much a lender can charge.  So….what will they do!   Only time will tell.

This leads us to the rules about how much a lender can charge.

Loan originators can still base their fee (called points) on the loan amount. However, under Dodd-Frank loan originators can’t charge the buyer points and collect an origination fee from the lender (called rebate financing). The lending industry is still working on compliance requirements, and the April 1 start date could be delayed.

Although the intent of the legislation is to protect consumers from being overcharged, there could be complications for buyers trying to get approved for a mortgage in a timely fashion. Most buyers don’t know when they make an offer if they want a loan with points or a no-point loan with a higher interest rate. Dodd-Frank could make it more difficult to move from one loan product to another.

 Here is a buyer tip.  In addition to checking on rates and loan costs, ask about the process and cost of changing loan products mid-stream.

One more thought about selling your Charlotte area real estate home.  While not directly related to Dodd-Frank, the appraisal process has become one of the biggest deal killers.  Lenders are no longer allowed to choose or even talk to an appraiser.  The process has brought appraisers to appraise homes completely out of their geographic area or comfort level.   However, it is not illegal for the sellers agent to talk to appraisers.  At Carolina Living Real Estate, we recommend to our agents they do two things to mitigate these potential problems.

1.  We will meet the appraiser at the home and share our comps to assist with how we came up with our selling price.

2. We recommend but don’t require that our sellers get a pre-listing appraisal.  This has been huge in our ability to get homes sold.

3.  We refrain from taking overpriced listings.

According to a recent article at CNN-Money, Some 4.2 million mortgage borrowers are either seriously delinquent or have had their cases referred to lawyers to pursue foreclosure auctions, according to LPS Applied Analytics.

Nationwide, it takes an average of 565 days to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the “robo-signing” issue is particularly combative, it’s 807.

In this article specific examples were given where borrowers have stayed in their homes as long as 5 years without making a mortgage payment.

An example of what has happened across the nation:

A borrower purchased a two-bedroom on Tampa Bay in 1998 for $135,000.

As the waterfront property’s value skyrocketed, eventually reaching $750,000, they refinanced twice (once to expand a business), and took out a second mortgage. They now owe more than $600,000 on the home, which is worth only $235,000.

Until we get out of this mess, the housing market will continue to drag!  However if you are looking to buy a foreclosure in the Charlotte and Lake Norman areas, the time may be right.

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