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New Disclosure Rules Could Slow Escrows

Rates are largely unchanged as there has been little economic news of significance since Mr. Bernanke’s comments on Tuesday. Unemployment rose again, but it was expected so it did not move the market. And existing home sales were up, but that too had little effect.

New Disclosure Rules go into effect at the end of this month. These news rules have the intent of making sure every borrower knows the exact terms of the financing he or she is getting at least 7 days prior to signing the actual loan documents. Revised Disclosures need to be sent out if a borrower’s rate ends up higher than the rate in the initial disclosures; there is another 3 day waiting period after the revised disclosures are signed. These new rules, while well-meaning, will have the probable effect of further slowing escrows.

We have already implemented procedures to make sure our borrowers sign initial disclosures substantially higher than the anticipated rate. We send out the disclosures with an explanation as to why the terms appear higher than expected. Our borrowers have no problem with this procedure and it will prevent unnecessary delays. For example, we just locked a borrower yesterday at 4.75% (for a 30 year fixed rate loan) at a cost of 2 points, even though her disclosures went out at 5.5%.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167