St. Louis, MO- "In the past 18 months, massive legislative changes have affected the mortgage landscape," stated Ruth E. Battle, Senior Vice President of Paramount Mortgage in a news story written for the St. Louis Association of REALTORS and published in last Sunday's Post-Dispatch newspaper. 

What does this mean for consumers? Borrowers seeking to purchase or refinance a home will have to complete more paperwork. Battle's article provides pertinent information for consumers about new mortgage-related laws.

Consumers will be asked for more information - more often.

Although the loan application form has not dramatically changed, borrowers are now being asked to provide more documentation. Standard income and asset documents like paycheck stubs and bank statements have always been requested.

Customers may now be asked for additional documents further proving identity or residency. In addition, lenders are asking for updates more often. For example, consumers may be asked to provide updated bank statements on a monthly basis for transactions taking longer than 30 days to complete.

Mortgage applicants should be prepared to answer in-depth questions about information on their credit reports including recent credit inquiries, especially if any new accounts have been opened.

Timing is everything - and everything takes more time.

The new rules enforce stricter time restraints. Eight days must now elapse between the application and closing dates to allow consumers the opportunity to shop between lenders.

Even small changes to a transaction can delay closings by at least three days. Seemingly small changes to the parameters of the transaction can trigger the lender to provide a new set of disclosures which invoke mandatory waiting periods. This protects the customer from last minute surprises.

Employers are being asked to provide more information - more often.

When consumers apply for a mortgage, lenders verify the job history of the applicants for the past two years. This used to be accomplished verbally with a phone call in many cases. New, stricter rules now dictate that lenders receive more written verifications.

Detailed income and job stability questions are being asked. Previous employers are also checked more in-depth. Employers are called again, within a few days of loan closing, to ensure the applicant still has a job.

Tax returns are being checked with the Internal Revenue Service (IRS).  

Usually tax returns are not requested unless a borrower is self employed or receives income necessary for the loan from dividends, interest, capital gains, etc.

Now, lenders are required in most instances to get a copy of your past two years of tax returns directly from the IRS. If there is any discrepancy, it may suspend or prevent an approval. Consumers grant lenders permission to check this by signing IRS Form 4506 or equivalent.

Lenders have limited contact with appraisers.  

Loan officers are not allowed to communicate directly with appraisers to prevent undue influence of final property value assessments. Many firms have resorted to using national management firms that may hire non-local appraisers in order to meet this guideline.

Paramount Mortgage always uses local appraisers familiar with the community to ensure accurate property values.

Consumers must protect their interests by working with a professional REALTOR and an ethical and honorable mortgage banker. The Paramount Mortgage team is always on top of industry changes working for the best interests of borrowers to make sure transactions work out as planned, in a professional manner.