What to expect when you’re expecting…you’re first Dodd-Frank mortgage

by State of Mind

by. Henry Meier

Well, it’s the morning of the Blessed Event.

Any moment now your credit union is expecting the arrival of its first Dodd-Frank mortgage and frankly you are a little nervous. Sure you and a couple of your mates have gone through training classes, created new policies and procedures and even put aside space for increased record keeping and hired energetic staff to look after these new creations and still, you are nervous. Are you really ready for all of these acronyms to come to life, for all that documentation and the possibility that the mortgage holder won’t like you and may take you to court?

At times like these it’s good to remember the basics. You have been doing mortgage lending for a fair amount of time and you are good at it. There have been thousands of pages of regulations used to promulgate these new servicing/underwriting mandates. While there is no doubt you will have to change some of your old ways, if you take time to step back to look at the forest you will see you are more than prepared for these new mortgage arrivals.

When that mortgage applicant comes calling, the most basic thing you need to figure out is her Repayment ability. The regulation mandates that “A creditor shall not make a loan that is a covered transaction unless the creditor makes a reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms.”

Something tells me you already know this. If you document that you follow this rule and have always made solid loans then you can continue to make the same loans you always have. While the regulation specifies eight basic underwriting criteria – things like income and debt-to-income – that must be considered when determining a member’s Ability to Repay a mortgage loan, chances are you have always taken these criteria into account. So long as you are documenting what you are doing, you are complying with the law.

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