Dodd-Frank Reform Act & QRM Impact on Minnesota

Training for Housing, Lending & Real Estate professionals.

On Tuesday, May 24th, the Minneapolis/St. Paul Business Journal reported that, according the Federal Reserve Bank of Minneapolis, one in three banks in Minnesota are still struggling to recover from the foreclosure/financial crisis.

With this backdrop... Minnesota's mortgage lenders now face the uncertainties created by the implementation of the definition of "Qualified Residential Mortgage" (Section 941) of the Dodd-Frank Reform Act.  This section of the Act will require all financial institutions that securitize mortgage loans to retain at least five percent of the credit risk, and proposes strict definitions for Qualified Residential Mortgages that can be securitized.

Two of the Minnesota Homeownership Center's partners, Minnesota Housing Partnership and Wells Fargo will be hosting two events offering affordable housing advocates, lending and Real Estate professionals the opportunity to learn more about the Dodd-Frank Financial Reform Act and how the definition of Qualified Residential Mortgages may impact affordable homeownership in Minnesota and the country.

Paul Weech, executive vice president for policy and member engagement at the Housing Partnership Network and expert on the Dodd-Frank Reform Act will be the featured speaker at both sessions.

Participants will learn about:

• What does the definition of QRM mean for homeownership?
• What is the perspective of Minnesota’s non-profit housing organizations, lenders & government leaders of QRM?
• What opportunities exist to influence the final definition of QRM?

SESSION 1: Webinar
Date & Time: Wednesday, June 1st, 9-10am CST

SESSION 2: Live Panel Discussion
Date & Time: Thursday, June 16th, 8 - 11:30am CST
Location: Wilder Foundation, St. Paul, MN

To register (pre-registration required) or to learn more about the topics covered, visit the registration page here: http://qrmminnesota.eventbrite.com/

New Mortgage Disclosure Forms

Share your opinion with the Consumer Financial Protection Bureau

It’s not very often that the general public gets to weigh in on items that will affect the entire mortgage industry. Recently, the Consumer Financial Protection Bureau (CFPB) released drafts of a new one-page (two-sided) mortgage disclosure form and is asking for YOUR opinion. The final form will combine the two mortgage disclosures that are currently required -- the federal Truth in Lending Act (TILA) mortgage disclosure and the Real Estate Settlement Procedures Act (RESPA) Good Faith Estimate -- into one two-page form, down from the current five pages.

While these forms are covered in-depth in the Home Stretch workshop, they certainly can be confusing for the average homebuyer, and the CFPB is asking the general public to offer their opinion on which of the two is easier for you (or your customers) to understand.

Both versions show the key loan terms like the interest rate, the monthly loan payment, any closing costs and taxes. Borrowers can quickly see how much they'll be paying per month, and, if the loan is adjustable, how those payments might change throughout the life of the loan.

Interestingly, the form also shows the Annual Percentage Rate (APR) paid over a five-year period, along with the amount of principal you will have paid off in five years (real equity).

The CFPB will be working on these forms until July of 2012, but over the next few months, the agency will be revising and re-uploading the form(s) on its site based on the input it receives.

So… go vote! Let your opinion be heard. Then come back and let us know which one you prefer in the comments. The two forms are available here.

When comparing the forms, we recommend that you focus on what information mortgage lenders and/or brokers should share with homebuyers to make the process as easily understood and transparent as possible. Remember… our goal at the Minnesota Home Ownership Center, and of our lender and real estate partners, is successful homeownership. Which form do you think will best help potential buyers in that respect?

Are you a Minnesota resident thinking of buying your first home? Do terms like TILA, RESPA and GFE sound like a foreign language? You can learn more about these, and many more, terms, the mortgage loan process and the best steps to follow to be a successful homeowner by taking a Home Stretch workshop. For more information, click here.

Single Point of Contact A Reality!

Servicers must assign a "Relationship Manager" to every struggling borrower

Some exciting news was released by the administration of the Making Home Affordable program yesterday (US Treasury and Fannie Mae).  By no later than September 1st, every struggling homeowner that applies for a loan modification under Making Home Affordable must be assigned a single point of contact - who must be an employee of the servicer with a direct, toll-free telephone number - for homeowners to be able to communicate with about their documents, their application and answer questions.  This same point of contact, known as a Relationship Manager, will also be available for non-profit counselors to use when speaking with the servicer about a homeowner's situation. 

Servicers have until November 1st to assign a Relationship Manager to EXISTING MHA Consumers.  (Homeowners that are already in review or in a trial modification).

If implemented correctly... this should end a huge number of the complaints the Center hears from homeowners that are struggling with their mortgage:  "I can never speak to the same person twice,"  "They lose my paperwork,"  "I've had to send in the same document 3 or 4 times"... etc. 

According to the Supplemental Directive 11-04 for Servicers, released on May 18th:

The same relationship manager is responsible for managing the borrower relationship throughout the entire delinquency or imminent default resolution process, including any home retention and non-foreclosure liquidation options, and, if the loan is subsequently referred to foreclosure, must be available to respond to borrower inquiries regarding the status of the foreclosure.

For now, the Supplemental Directive will only be in effect for servicers that are participating in the Making Home Affordable initiative, and have a Program Participation Cap of more than $75mm.  Basically, this covers the largest 20 servicers in the country... and hopefully smaller servicers will follow suit.  Both GSEs (Fannie Mae and Freddie Mac) are currently exempt from this directive.  In Minnesota, given the partnership between Fannie Mae, the Minnesota Home Ownership Center and the Homeownership Advisors Network, there is already a single point of contact through the local non-profit counseling agency.

Will this improve the MHA program?  What other improvements do you think are necessary... leave us a comment and let us know what you think!

Preforeclosure Notices Drop 21% in First Quarter

The beginning of the end of the foreclosure crisis in Minnesota?

Source: revjavadude

The Minnesota Homeownership Center has released its most recent report on the aggregate number of Preforeclosure Notices received by foreclosure counselors in the Homeownership Advisors Network and the numbers signal a possible light at the end of the tunnel for the foreclosure crisis that has affected the housing industry and Minnesota families for more than four years.

In the first quarter of 2011, members of the Homeownership Advisors Network received 14,595 preforeclosure notices, a drop of 21% from the same time period a year ago, and a 15% drop in the number of notices received last quarter (Q4, 2010).

This number reflects the lowest number received by counseling agencies since we started compiling the data in the first quarter of 2009:

Click To Enlarge

The drop in notices received by counseling organizations in the Twin Cities metro was equally dramatic. 8,836 notices were received, a 20% decrease over the same time period in 2010, and, like what we saw statewide, a 15% drop in the number of notices received last quarter:

It’s certainly too early to celebrate, as the number still means that almost 15,000 Minnesota families are still dangerously close to losing their homes to foreclosure and thousands of others are still struggling with their monthly mortgage payment. In addition, the most recent (Q1) Sheriff Sale numbers from HousingLink while down, still reflect numbers that are 400% higher than pre-crisis numbers. But it might be time to be cautiously optimistic that the very worst of the crisis is over. Remember, the housing crisis was a overwhelming painful for Minnesota and families involved and recovery will take MANY years.


If you or someone you know is struggling with their mortgage payment, new programs, resources and assistance are becoming available all the time. DON’T GIVE UP… contact a foreclosure counselor that is a member of the Homeownership Advisors Network TODAY to see if there’s help available for YOU to avoid foreclosure. Even if you’re not yet behind, now is the time to call. To find your local foreclosure counselor, click here.

For additional information about the statutory requirement for pre-foreclosure notices, visit the Office of Revisor of Statutes website here.

Foreclosure Moratorium in Minnesota?

Disaster Areas in Minnesota Affected

On Tuesday May 11th, the Federal Government announced that federal disaster aid had been made available to Minnesota to assist with the state and local recovery areas from the spring storms and flooding that started back in mid-March and continues through today. While this means that Federal funding is available to state and local governments to help with protection and recovery efforts, there is also a housing-related issue that this National Disaster declaration puts into place: a 90 day moratorium on any foreclosure action on any FHA backed loans for consumers affected by the storms/flooding. (Fannie Mae and Freddie Mac and a handful of private lenders/servicers also have standing policies about halting foreclosures in Disaster Areas.)

The counties affected by the National Disaster declaration are: Big Stone, Blue Earth, Brown, Carver, Chippewa, Clay, Grant, Lac qui Parle, Le Sueur, Lyon, McLeod, Nicollet, Redwood, Renville, Scott, Sibley, Stevens, Traverse, Wilkin, and Yellow Medicine counties.

Remember, the moratorium and other tools that HUD has put in place for lenders (mortgagees) to use are only available to homeowners that have been DIRECTLY affected by the disaster.

In a clarification conversation the MN Home Ownership Center had with local HUD representatives in Minnesota, the word AFFECTED can mean:

• Either the property itself was damaged or destroyed by the storms/flooding,

or

• The homeowner’s income was affected by the flooding (their place of work or business is flooded, for example)

Affected homeowners who have an FHA-backed mortgage are instructed to call their lender to see what tools FHA has in place for helping with foreclosure avoidance following the disaster declaration.

In addition, the Homeownership Advisors Network is ready to assist ANY homeowner that is struggling with mortgage payments, especially those homeowners that have been affected by the spring storms.

Don’t delay, contact a foreclosure counselor that is a member of the Homeownership Advisors Network TODAY to see if there’s help available for YOU to avoid foreclosure. Even if you’re not yet behind, now is the time to call. To find your local foreclosure counselor, click here.

Dangerously Unprepared

Buying a home without Home Stretch

Even after all of the news about the dangers associated with purchasing a home without being fully prepared, it appears as though the message still isn’t getting out to potential homebuyers. According to a newly-released survey from Zillow Mortgage Marketplace, a surprisingly high number of people don't understand the home buying process, especially the information about obtaining a mortgage, and may be making poor financial decisions as a result.

Those surveyed answered basic questions about mortgage information and terminology wrong almost half of the time. Forty-four percent of buyers admitted that they are not confident in their knowledge of mortgages or the mortgage process!


Other findings include:

• About 77% of prospective homebuyers did not clearly understand what factors are involved in determining a mortgage interest rate, believing that annual income is an important determinant.
• More than one-third (34%) of the respondents did not understand that lender fees are negotiable and that they vary by lender. They believe lenders are required by law to charge the same fees for credit reports and appraisals.
• More than one-third (37%) of prospective home buyers who were polled believe that pre-qualifying for a loan means they have secured financing. The reality is that "pre-qualification" is used to describe an earlier step in the process when a lender or Homeownership Advisor approximates how much you can afford, but does not pull your full credit report or request any sort of documentation to verify the information you provide. A pre-qualification is NOT a pre-approval.

Before you start the process of making what may be the LARGEST PURCHASE IN YOUR LIFE, we highly recommend that you participate in a Home Stretch workshop. This is a class for potential homebuyers that is recognized nationally as a proven tool for preparing Minnesotans to be successful homeowners. There is an entire section of the Home Stretch workshop dedicated to fully understanding mortgage loan terminology, how to shop for a loan, how credit affects loan payments and how to avoid being taken advantage of when choosing a loan.

Year after year, Home Stretch participants report that help with understanding mortgages and the loan process was the MOST HELPFUL part of the workshop. In fact, NINETY-FIVE PERCENT of Home Stretch participants report that their participation in Home Stretch will help in the process of buying a home, and 98% would recommend the workshop to someone else. (For more information about consumer satisfaction with Home Stretch, view the most recent report here).


Are you thinking of purchasing a home in Minnesota? You can learn more about the mortgage loan process - - and the entire home buying process by taking a Home Stretch workshop. For more information, click here.

HECAT Request For Proposals Available

As many of our readers know, the State of Minnesota is unique in that we are the only state in the country with a dedicated pool of funds that provides financial support to eligible non-profit organizations to deliver a variety of homebuyer/homeowner education, counseling and training services to Minnesotans. This dedicated pool is known as HECAT (The Homeownership Education, Counseling and Training Fund).

Some of the valuable services that are funded through HECAT include:

• Pre-purchase education and counseling (Home Stretch),
• Post-purchase education and counseling,
• Home equity conversion counseling (Reverse Mortgages) and
• Foreclosure prevention counseling

Funds for HECAT come from a public-private partnership of four agencies and organizations that are fully invested in ensuring that Minnesotans have access to the education and counseling tools necessary to achieve successful (sustainable) home ownership:

The Family Housing Fund,

Greater Minnesota Housing Fund,

Minnesota Housing (Finance Agency), and

Minnesota Home Ownership Center

Each of the four funding partners not only contribute financial resources they also actively participate in the grant-making process and provide technical assistance throughout the year.

The Request for Proposal (RFP) for funding for programs in 2011 and 2012 (funding year runs from October 1st through September 30th) is NOW OPEN.  The deadline for applications is 5:00pm on Wednesday, June 1st.  This is a STRICT deadline.

For more information about HECAT, or to view the RFP and even lists of award recipients from previous years, visit the Minnesota Housing website... here.