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I’m sorry, your closing is cancelled right here at the table

Just imagine everything looking like it was going smooth.

You sold your listing of 9 months, worked out the short sale on the first with Bank O ‘Merica and a second with Bumble Bee Savings and Loan after going through 3 cell phones, 2 email accounts for because of space and a heart transplant.

Your seller, the buyer and their agent were very cool throughout the entire debacle even though the selling agent’s car was towed and the buyer was lost in East Africa for three weeks.

So, finally at the closing table. All of you sitting there, you have the mortgage papers, all looks great. (Oh no, here it comes)

Yikes, on a supplemental page of the HUD settlement sheet, there is a discrepancy of $25 because the local township just raised their transfer tax two months before.

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The mortgage person on the original good faith estimate did not put the charge because it did not exist then but now it does.

Well, according to HUD all is fine, just have the loan officer pay the difference. But, our friends at the Federal Reserve say…whoa…..since the broker is getting their compensation from the lender (because it’s a zero point mortgage), the loan officer or their company can’t pay.

And in fact, no one else can either. HUD says it must be the loan officer or his company but the Fed (as of 4.1.11) says they can’t.

What do you have? Dead Deal. Start a new mortgage. Too bad suckers.

The Federal Reserve has come out with the compensation rule and refuses to put in writing the proper guidelines for it. Also, the soon-to-come CFPB will be taking over the rule making in the end of July.

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But, I have found out that the same person writing the rules for the Fed will be going to the CFPB.

Ok, want to do something? Besides contacting your REALTOR board, your state association and NAR directly, please address in your own words why this new rule is harmful to your business to Paul Mondor at the Federal Reserve. His email address is Paul.Mondor@frb.gov. He is the Senior Attorney at the Fed that has been the front person with the industry.

Written By

Realty Reality! That describes Fred, a sharp witted and outspoken realist for the mortgage and real estate world who has appeared on CNBC and NPR's Marketplace along with being quoted in the New York Times, The Wall Street Journal and other media outlets. Fred is the CEO of U S Spaces, Inc/Arrivva (a real estate brokerage firm in PA, NJ, DE and CA) and U S Loans Mortgage Inc (mortgage brokerage in PA, CA, FL and VA), and serves on the Board of Directors and is the Federal Legislative Director for the UpFront Mortgage Brokers. Fred is also the co-creator of real estate startup Rentscoper.com, a mathematically driven rental search engine. See everything Fred at fredglick.com.

10 Comments

10 Comments

  1. jay Great Falls

    February 3, 2011 at 8:35 pm

    Hey it’s great having government interfering in the marketplace including forcing banks initially to loosen their lending standards for their social justice campaign. It’s been a very positive experience on the economy and housing industry for the past 5 years…. 🙂

  2. Fred Glick

    February 4, 2011 at 8:34 am

    As a follow up to my article, check out this video from thinkbigworksmall.com :

    https://www.thinkbigworksmall.com/mypage/archive/1/57858/

  3. Connie

    February 4, 2011 at 9:46 am

    Hey, we need a little common sense here. We need the flexibility to work this out, especially at the closing table.

    I can understand that loan practices have to be stricter, since the massive fraud that “Bernie” brought to our industry. But now, don’t you think its time for common sense? We need to sell these homes so we can get back to a ‘normal market’.

  4. Missy Caulk

    February 4, 2011 at 9:49 am

    “on a supplemental page of the HUD settlement sheet, there is a discrepancy of $25 because the local township just raised their transfer tax two months before.”

    Fred, the thing that sticks out to me is 2 months before….that is long enough for the Title Company (or whoever in your state) gets the closing file to catch this and get it changed.

    Not saying the rule is good, it is ridiculous…but in this case should it not have been caught before the fact by the lender, attorney or Title Company and not stopped a closing?

  5. Fred Glick

    February 4, 2011 at 10:27 am

    @Missy, ignore the details for a moment.

    The Fed is doing something they cannot do. What will be next? Limit real estate commissions?

    It’s the theory that is the issue.

    But, to speak to your issue, a broker who is not informed about the change, can’t change the form that the clients have already signed. The process is totally flawed and broken.

    The Fed is just making it worse.

    Call me at 215-852-4469 for detailed clarification.

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