The Big Residential Pendulum Swing
Until 2006, anyone in the US who could breathe could get a loan for buying a house. Many people took advantage of the situation and created the foreclosure mess that is still affecting the overall national economy as well as producing international repercussions. The deregulation that consented to bring the real estate exchanges to level nobody ever dreamed clearly, was not properly policed, they say, and therefore a confusion resolved that will have consequences for a long time.
The people who made dishonest or incompetent deals then have mostly disappeared so now it is up to the State to regulate the situation and bring it back under control, but every time you introduce a "solution" to a problem that comes from people that are not Directly familiar with the problem you end up having a bigger problem, and this is what is apparently going to happen with residential loans starting as of January 2010.
A whole new set or regulations, called RESPA (Real Estate Settlement Procedures Act), will go in force and change the way people will buy houses and the way banks will deliver loans and the way title companies will have to perform closings. Chances are your average Realtor is not very informed about this, since it is a quite complex subject, but the fact is that this is the most sweeping change in procedures in the last 25 or more years.
The objective is to deliver in the hands of consumers a very clear idea of what they loan will look like so that they are able to shop around knowing exactly the figures compare from one lending project to the next. But not only this, when the prospective buyer will get a Good Faith Estimate from a mortgage broker or from a bank underwriter, this estimate will contain some figures that will be set in stone and that will not change until he goes to the closing, and Will have to be placed on the closing statement (the so called HUD-1) which will change and will become three pages long versus the two pages document we are used to see.
The whole real estate industry will change because of these new regulations and Realtors will be greatly affected as well as buyer and sellers, because their ability to actually close on a transaction will depend very much on their understanding of these new rules. To put it simply: if the initial work is done wrong, then it will be very difficult to get to the end and still be able to close.
Real estate like other industries is becoming regulates more than ever. And the US seem more and more like Europe. Actually, from what I have heard during a 2 hours seminar just on this topic, closing on a house in the US will be much more difficult than buying one in Europe. The pendulum has now swung all the way in the other direction.
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