The mortgage industry faced tremendous change this year with new regulations coming into effect under the Dodd-Frank Wall Street Reform & Consumer Protection Act. Everything from loan terms and closing fees to mortgage underwriting and servicing procedures was affected, and there was significant concern in the real estate and financial services industries as to how these rules would impact the marketplace.
Dodd-Frank’s effect on the mortgage industry
At this point, the industry is about 60 days into the new financing world, and there have been numerous challenges for both lenders and borrowers. Below are a few of the most notable issues:
- Lenders of all sizes face increased costs for the technology, people and other solutions necessary to comply with the regulations, especially if they had to update or install entirely new systems.
- Smaller banks felt the impact on their bottom-line, and many expect to either leave the residential lending business altogether or merge with a larger bank in the coming years, according to a recent survey, the Mercatus Center of George Mason University. Mortgage investors are stricter than ever with how their money is spent, which has created further difficulties in the mortgage originations market and made it harder to secure a loan.
How Long and Foster is Helping Mitigate the Impact
Fortunately, Long & Foster foresaw potential issues in the industry as a result of the Dodd-Frank Act coming into fruition and planned aggressively to minimize the impact on both their customers and their mortgage company, Prosperity Home Mortgage. In doing so, they are now able to more easily navigate the challenges presented by the new regulations, building technology systems and a corporate structure to address the complex requirements both today and in the future.
- With in-house processing, underwriting and closing, as well as company-managed appraisals, Prosperity has more control over the loan process, so it can better ensure that their clients get the best products for their needs.
- That control also means they have a better handle on all compliance efforts. In fact, of the three standard investor audits Prosperity has undergone to check compliance and credit, they have passed all three with a best-in-class result.
- Prosperity’s Capital Markets team has direct agency relationships and prices optimally to ensure its offerings are among the most competitive in the market today. For example, more than 60 loan products are available through Prosperity today, including the Advantage 55 Home Loan, a jumbo loan that takes advantage of lower Adjustable Rate Mortgage (ARM) rates with the stability of a fixed mortgage.
Unlike others in the industry, Prosperity has approached the new regulations head-on and is off to a brisk & steady start this year, funding more than 300 loans in February alone.