With the irresponsibility Fannie Mae and Freddie Mac serving as the leading cause for the creation of the real estate housing bubble of 2007, the Federal government has seized the opportunity to tighten mortgage lending standards in order to prevent an event like this from ever happening again.

What are some of the changes the fed has made, and how might they affect you?  Take a minute to learn more:

1. Loan originators can no longer be paid monetary compensation, directly or indirectly, for any reason other than the amount of the mortgage for which they help someone get approved.In the past, loan originators could be paid in a variety of different ways, but no longer.

   What does this mean to you, the prospective homebuyer?  Mortgage brokers are squeezed out of the competition for your business, which means you’ll be dealing with bigger companies, and most likely higher prices.

   A Utah mortgage broker survives by handling mortgages Fannie Mae and Freddie Mac wouldn’t touch.  Now, they must charge the lowest combination of fees, so if you’re someone with a lower credit score that may not make the mortgage broker as much money, you simply won’t receive as much attention, and you’ll have a much more difficult time receiving approval for a mortgage.

   With mortgage brokers, who typically help borrowers find the best rates and fees possible, potentially being squeezed out of the process, finding a favorable Utah mortgage loan becomes that much more difficult.

   By the way, if you’re interest in the legalese, the federal regulation serving as the basis for these changes is called the Z Loan Originator Compensation and Steering 12 CFR 226.

2. SAFE (Secure and Fair Enforcement Licensing Act)Former President George Bush signed this into law in July of 2008 in an attempt to regulate the real estate and mortgage industries conduct business.

   Basically, the standards the legislation was attempting to meet included minimizing the number of home foreclosures, updating regulations regarding the FHA, and putting safeguards in place for consumers who approach Utah mortgage companies.

   The SAFE act instituted minimum requirements for registering and licensing:

   • Mortgage loan originators
   • The Conference of State Bank Supervisors
   • The American Association of Residential Mortgage Regulators

   Basically, this act looks to protect the consumer by minimizing fraud.  Here are some of the specific steps the SAFE act takes to protect consumers:

   • Loan originators are now subjected to a standardized license application and various reporting conditions, and must have their information included in a database.
   • Regulators now have the ability to communicate with one another more effectively by exchanging information.
   • The behavior of loan originators is now monitored.
   • The licensing process has now been updated to increase the effectiveness of regulation.
   • More safeguards are implemented against fraud.
   • Clients can now obtain free information about the employment history of loan originators and any penalty actions taken against them.
   • The regulatory system implemented helps to motivate loan originators to focus on providing the best service possible for clients.
   • Regulation is now supplied for the instruction, training, and examination of lenders targeting subprime markets.
   • Consumer grievances must now be collected and distributed in an efficient and productive manner.

In a nutshell, if you’re looking for a Utah mortgage loan, all of these new regulations exist to protect prospective homeowners like you from predatory lending practices, fraud, and any other dishonest actions loan originators take.  While you don’t need to know these regulations yourself, now you can relax knowing a system for checks and balances is in place to help make your next home-buying experience a safe one.