They may not understand why lenders ask for clarification on income, asset, and credit information -

It's important for buyers to understand that government regulation is now a large part of the home purchase and financing process and timeline.

From initial disclosures and the new Loan Estimate all the way through the Closing Disclosure and its allowable variances, each step involves careful compliance with new regulations. Here's some background on why all this compliance is in place.

- and usually don't realize that we have to ask.

As we have discussed before, lenders evaluate the details of a buyer / borrower's income, assets, and debts to determine if the loan should be made. These details are part of the risk management and qualifying framework on every loan application.

However, in today's high-compliance lending environment this due diligence is far more than just good business practice.

Processing and underwriting a mortgage application today combines sound risk management with

careful government compliance.

The Federal Government has made all financial institutions and businesses their "front line of defense" when it comes to financial inaccuracy and misrepresentation.

Lenders are required by Federal law to document and verify sources of income, account balances, debts, assets owned, and all other information submitted on the loan application.

The Consumer Financial Protection Bureau (CFPB), a relatively new Federal government agency, is responsible for administering and enforcing most Federal laws that regulate consumer financial transactions in the US.

Addressing problems revealed after the real estate and lending meltdown of 2008, the CFPB placed additional layers of compliance and disclosure into the evaluation of a borrower's financial profile through their Ability To Repay and Qualified Mortgage regulations.

ATR and QM standards compel lenders to perform thorough due diligence when evaluating an application. Not checking all submitted facts can result in a lender being forced to buy back defaulted loans if made without proper screening.

In addition, the Federal Financial Institutions Examination Council (FFIEC), an interagency supervisory body, has charged all individuals and companies handling financial transactions in the US with the responsibility to comply with Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations.

No longer is the only consideration whether a borrower has the capacity and intent to repay a loan, lenders must now screen applications and transactions for inconsistent, unsupported, and even fraudulent entries.

Here are a few types of mortgage-related misrepresentation:

- Property Valuation - manipulating property values higher to

fall within more advantageous LTV (Loan-To-Value) ranges,

or lower to justify a fraudulent short sale.

- Identity - concealing the identity of an actual buyer due to

credit or legal issues - includes "straw buyer" situations.

- Occupancy - stating that the intended use will be as primary

residence in order to get favorable interest rates and terms

when the real use is second home or investment / rental

property. Also when investment / rental is called second

    home for the same reason.

-   Employment and Income - overstating earnings and/or work
    history to qualify for better loan programs, terms, and rates;

    using income from undocumented sources.

-   Debt Elimination and Foreclosure Rescue - representing that
     valid debts overdue or in collection can be erased from the

credit report before loan application or refinancing; or that

foreclosure can be stopped or delayed if a fee is paid to a

third-party "rescue" company.

- Reverse Mortgage - taking out a reverse mortgage without the
full knowledge of the eligible older property owner, or

diverting those funds away from the owner; usually also

involves Power of Attorney, identity, and investment fraud.

Often, a single case of mortgage misrepresentation can include 2 or 3 of these different types committed by various participants. Numerous cases are prosecuted as conspiracies to defraud, with some combination of Loan Originators, Realtors�, title companies, appraisers, and buyers being involved.

In light of all this, honest buyers and real estate professionals must comply with the same regulations that are intended to stop the not-so-honest ones.

Lenders can not only be forced to buy back fraudulent loans that got through screening, they can also be permanently prohibited from lending in the US and hit with very large fines if found negligent or involved in the misrepresentation.

Individuals involved in fraudulent transactions can face time in Federal prison and be personally fined.

Letting buyers/borrowers know ahead of time

that explanations and followups will be requested helps them know what to expect and be more comfortable with the application and approval process.

As you can see, it goes WAY beyond double-checking for our own assessment of the borrower and the transaction...we now have to deal with multiple layers of government compliance.

What we have discussed here also illustrates the need for your buyers being PreApproved when they want to use financing.

Have them call me when they first start looking at properties with you.

Let's deal with any followups, explanations, and clarifications before they have a chance to affect your contract dates.

Let me reinforce the trust

your buyer has placed in you! sm

Chris Carter Mortgage Advisor / Originator

239 898-5455 cell NMLS 861361

Paramount Residential Mortgage Group, Inc

4375 Radio Rd

Naples, FL 34104

239 659-1660 office � 2015 Chris Carter

May 6, 2015

Chris Carter

Mortgage

Advisor / Originator

NMLS 861361

239 898-5455 cell

Naples, FL

Mortgage Bankers