HR 1728 will be considered tomorrow before the House Financial Services committee. It needs to be known by all that mortgage reform in some form is coming this year.
Some of the main points of HR 1728 include a Federal Duty of Care that included licensing, providing "appropriate mortgage loans", and tagging each loan with an originator ID. That is pretty interesting.
Yield spread premiums are specically labelled steering incentives, The scary thing about this label is that it reveals to me a lack of understanding about the bond market on the part of those who are making this legistation.
The language is that premiums cannot be used to steer applicants towards more costly mortgages.
To me this language is too open, leaving wide range of interpretation for later regulators. Even if the bill becomes law, efforts must be made to determine what might constituting "steering to a higher cost"
I understand taking a qualified client from FHA loan to a subprime, adjustable rate loan, but are we also concerned with much smaller price variations that fall within competitive prime market rate ranges.
The bill provides for some safe harbor concerns to ensure put aside secondary market investor concerns over potential libilities.
Here is a summary provided by the House Financial Services Committee.
One thing remains in my mind, mortgage brokers need quality representation - during the legislation process and also during the regulatory process.
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Richard Smith Conventional, FHA, FHA 203k, HUD $100 down purchases, VA, Jumbo VA, Rural Development, Jumbo, FannieMae Homepath, Home Equity Line of Credit (HELOC). |
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Thanks for the information Richard.
Please remember me if you learn of anyone moving to "The OC" and I will do the same!
Michael Caruso, Broker ABR ABRM CRB CRS GREEN GRI
2007 President, Orange County Association of Realtors
(949) 753-7900
Thanks for bringing this to our attention.
I must admit that reading it saddens me because it shows a lack of understanding of the matter on the part of the representatives writing the bill.
Sad, sad.
Hi Richard -- I echo Lenn's sentiments in that legislation is rarely well thought out even when the intentions are there.
Richard... this is very scary, about the issues about YSP, yield spread premium. You wrote :
"Yield spread premiums are especially labeled steering incentives, The scary thing about this label is that it reveals to me a lack of understanding about the bond market on the part of those who are making this legislation.
The language is that premiums cannot be used to steer applicants towards more costly mortgages."
The government needs to stay out of this one specific issue, because they have no idea. Most states have caps on what a lender can make as far as in points. And in many cases, many of us use the YSP to keep other costs down.
As Lenn stated and that Chris second, they rarely do think these things out. Besides, this is crap that should have been discussed 15 years ago, but that doesn't get mentioned until we are in a major doom and gloom. They should have gone after companies with unfair lending practices a long time ago. My input on that? That the gov't was greedy and looked away... sad, but I bet there is some truth to that. thanks for this info.
Jeff,
Maybe you can get up there like you attempted with DPA.
Richard
Richard, Thanks again for bringing the news out. This is huge and will affect us all considering the only thing that stopped it last time was a conservative Senate. We all better line up to fight this one, or we will all be losing.
Gerry Suarez, Jr.
Your FHA Loan Pro!
Gerry,
Just one more thing to add to HVCC, RESPA reform, tightening guidelines, increased minimum scores, higher MI premiums, loss of programs.
But at least rates are low.
Richard
"The scary thing about this label is that it reveals to me a lack of understanding about the bond market on the part of those who are making this legislation."
This continues to be a problem in Washington. We have professional politicians trying to make executive decisions for industries that they don't know much about.
Lenn, amen to your post and Mark is right when he says :"We have professional politicians trying to make executive decisions for industries that they don't know much about."
...and we have to work by what they decided....scary
Bettina
very true. unfortunately i've resigned myself to the fact that lobbyists control and draft every single piece of legislation in this country, and the politicians simply don't care and/or don't understand. it'll be interesting to see how all of these changes affect the consumer. i strongly agree with your point about FHA versus sub-prime. Furthermore, there was basically no incentive for a broker to ever steer someone from FHA to subprime because from what i recall, yields were always higher on FHA than any subprime loan, even with prepayment penalties. the subprime problem has solved itself since investors obviously no longer trust Wall Street's ability to price risk. Everyone seems to have overlooked these obvious facts. but like the politicians always do, they're coming to the rescue with the wrong solution about five years after the problem was solved by the markets anyway. but whatever gets them re-elected....
You guys just don't get it. This legislation is aimed at stopping you idiots from doing the same thing over again. It isn't, as John Jones says - that the subprime problem has solved itself since investors obviously no longer trust Wall Street's ability to price risk - IT HASN"T SOLVE A DAMN THING. It still lingers - it is still there - and it can Pop right up again without constant oversight. This bill simply controls these "lingering theories" and nips them in the bud. I will bet that when this bill is in its final passage - Republicans will vote NAY and the introducing party of Democrats vote YEA. And then you'll have to stop screwing up the financial system with all these loops and holes you are so fond of.
You think you know more than Congress? You may know more about how to Rip the person off - but you just don't get it. The people are tired of your "Oh it will fix it self" crap. It is this UnderSighted view that has led this problem down a path of ruin for too many people.
Richard Lewis, Bank of America
Richard,
Thanks for the comment. Good to hear another voice. Some clarity will help - are the "you guys" referring to mortgage brokers or the the bail out recipient banks who created and marketed the programs to the consumers, to the mortgage brokers, to the investors, to Congress, and to the GSE's.
Richard Smith
For Richard Lewis of Bank-of-America;
Your ignorant reply is testament to the banking-conglomorates insistance in pointing-the-finger at someone else. Case-in-point.
Enough said.
Roni Rebelo
What is really scarey is that owner financing is being jeopardized. Write your senator to vote NO and revise.
The full text of the bill can be read here.
What Does It Say?
The proposed legislation focuses upon the predatory lending practices of yesteryear and the resulting subprime debacle, imposing stringent requirements on mortgage brokers, servicers, appraisers, etc. Unfortunately, owner financing gets caught up in the dragnet, and the impact could be devastating. The offending text of the bill is in section 101(3)(e), which defines who is exempt from being a ‘licensed mortgage originator':
'(E) does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 1 property in any 36-month period, provided that such loan--
(i) is fully amortizing;
(ii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan;
(iii) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and
(iv) meets any other criteria the Federal banking agencies may prescribe.
What Does This Mean?
As long as you provide owner financing on the sale of your property no more than one time every three years, you will not be in violation of the statute. Any individual who does sell more than one property every three years via owner financing will be in violation unless they are a ‘licensed mortgage originator'. State laws vary, but typically a ‘licensed mortgage originator' must have a $25,000 to $50,000 surety bond, three years mortgage origination experience, a physical business office in the state in which the property is located, and continuing education requirements. In other words, very few, if any, Mom & Pop sellers will ever jump through the hoops to become a ‘licensed mortgage originator'.
Its hilarious how this "Richard Lewis" rips on mortgage brokers and labels us "idiots" you don;t think Bank of America didn't take advantage of the market boom??? They were in subprime and their mortgage loan officers made more than any one broker. Please....you clowns at B of A hide all the billions Merrill Lynch paid to their brokers at the detriment to your shareholders who hold virtually worthless stock and take what $45 billion for Uncle Sam??
OHHHH om top of the fact that your scumbag predatory credit card division is the main reason why we have Credit Card Reform in Congress becuase of you cockroaches throwing anchors to people with a heavy debt load already!
He whos in glass houses....Mr Lewis. Oh and your CEO Ken Lewis should be brought up on criminal charges for not disclosing the Merrill payouts!
You know its real funny someone from Bank of America lecturing us mortgage professionals on how to act ethically haha
heres the legislation that came out today
http://www.govtrack.us/congress/bill.xpd?bill=h111-1728&tab=summary
read middle of page 68