Is the mandatory Flood escrow rule essentially already in effect? (Yes)
The official date is January 1st, but the way the Rule's structured may mean that, practically speaking, the Flood escrow requirement is already in effect.
So as everyone's heard a million times, as of January 1st, 2016, escrow for Flood insurance is mandatory. Here's a link to the rule/commentary.
But if you've blocked this out and are planning to look at this in early Spring when loans with app. dates of January 1st and beyond start closing, watch out!
Closing Date = Trigger (Not Application Date)
Escrow is mandatory for loans closed on or after January 1st, 2016 -- not on loans with application dates of January 1st and beyond. That means that essentially the Escrow rule has already taken effect -- any loan in your pipeline today that closes on or after January 1st must comply with the Escrow rule.
Well, Ben, what about those loans that are closing on or around January 1st that we're just not sure of? Are we just supposed to guess?? This was addressed in the commentary - our industry advocates raised this problem up, and it was tossed aside by the rule-writers in this exchange:
[Commenters were concerned that] these loans may initially be designated as non-escrow loans, but if they close on or after January 1, 2016, lenders will have to re-categorize these loans as loans requiring the escrow of flood insurance premiums and fees. ... [T]he Agencies believe that lenders have the capability to anticipate whether loan applications submitted prior to January 1, 2016 may close on or after January 1, 2016 and thus should structure those transactions accordingly.
What does that mean? I think that translates to - "figure it out."
Closing Disclosure
And we can't have a week without TRID tips! So, one thing we're noticing on TRID files regarding Flood insurance is this: Flood insurance is disclosed on p.1 in Estimated Taxes, Insurance, & Assessments (whether escrowed or not). But be careful that the system brings it over to the correct spot - Flood Insurance must actually be included with "Homeowner's Insurance," it will not be itemized out separately. With our TRID review, we're seeing a good number of Flood loans where this carries over as a separate charge under "Other," or doesn't come over at all--both of which are incorrect.
In Other News:
Wells Fargo released some very informative TRID notes this week
SCA QC announcement - contact Rich Lahar
The CFPB's December Complaint Snapshot is out (available here) - see anything interesting? Mortgages are the most complained about product in the metro Atlanta area
Auditing TRID files - we're finding a surprising number of attorneys submitting incorrect license #s. At least in Massachusetts you can double check this at this BBO website
Do you do QC? **SCA Announcement: HUD's new Handbook 4000.1 will require all lenders to update their QC policies & procedures. Anyone that wants a hand with this should reach out to us - we'd be very glad to help. Contact Rich Lahar at RLahar@scapartnering.com or call him at the office at 781-356-2772.** What is this handbook all about? Here's one take from a Wisconsin Appraiser on how this affects appraisers - "The only problem is that, to some degree, it requires us to be an Appliance operator, Electrician, Geologist, Electrical Transmission line Analyst, Aviation Flight Path Analyst, Well driller, Pipe line Analyst, Engineer, Chemist, Soil Analyst, Septic expert and it sounds like FHA wants us to look in the freezer, cook something in the microwave and oven, do a load of laundry, have a drink of water, and wash the dishes while we are there."
Every business has employees. Some have promise, some don't. How do you decide who to invest in? No doubt personal traits such as work ethic and intelligence are crucial to consider, but put that aside for a second. In one sense, this isn't too different from the decision of whether to outsource a particular service. The age old advice is - don't outsource your way to mediocrity - i.e., don't outsource crucial skills that your company will need to succeed in the future.
For example, with the increasing commoditization of the mortgage business, perhaps your management decides that processing speed is the key to success for the next 10 years. Well you won't want to outsource processing to a third party, now will you! Similarly, when deciding which employees to invest in, you may decide to invest in an employee with the potential to be a great operations manager.
Or maybe your bank decides commercial lending is your chance for success.
You're not going to outsource loan review of commercial files if you can help it, instead wanting to build that process/expertise in-house. And, if you believe that, then commercial lenders (or commercial lenders to-be) may be going to seminars, getting training, and receiving other support that other folks won't.
"We rejoice in our suffering because we know that suffering produces perseverance, perseverance produces character, character produces hope. And hope does not disappoint us."
- Romans 5:3--5
*Sorry for attributing last week's quote to a business professor (it was actually the Dalai Lama) - but thanks to everyone for pointing that out!
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**These are our opinions. We're not authorized, or willing, to express those of others.**