NAMB has issued a call to action in response to today's markup of HR 1728 by the House Financial Services Committee.
UPDATE 4/29: The House Financial Services Committee has passed HR 1728, without HVCC delay amendment. Additionally there are provisions for credit risk retention and for yield spread premium restrictions. This according to several news sources. Here is the story from Wall Street Journal.
The primary focus of NAMB's call for action is to push for an amendment to delay implementation of HVCC, the policy that mandates a property appraisal process that many active in the industr believe will introduce inefficiency, unreliable valuation, increased costs, and will harm consumers by limiting the ability to transfer an appraisal from one lender to another.
Further, HVCC seems not to correct the problem it is intended to correct, which is coerced inflated appraisals. The appraisal management companies are not immune to being party to coercion. An appraisal management company was involved in the initial law suit that led to the HVCC procedures.
While delaying the implementation of HVCC is the primary focus of NAMB's call, the provision that is designed to end steering fees seems equally important.
The NAMB memo also addresses the section of the proposed legislation that addresses yield spread premium, kick backs, and steering incentives. The memo references "the importance of Title I, Section 103" of HR 1728, stating that this section "was carefully drafted and negotiated as part of HR 1728. This Section does its part to ban incentivized compensation from all distribution channels while still protecting mortgage brokers' ability to earn a living. It offers true consumer protection."
The language of that section is of course difficult to read, but here are some points.
- For any mortgage loan, the total amount of direct and indirect compensation from all sources permitted to a mortgage originator may not vary based on the terms of the loan other than the amount of the principal.
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Nothing in the bill should restricting a consumer's ability to finance, including through rate or principal, any origination fees or costs permitted under this subsection, or the originator's ability to receive such fees or costs (including compensation) from any person, so long as such fees or costs were fully and clearly disclosed to the consumer earlier in the application process as required
Here is a link to the full bill. The two above quotes were taken from Title I, Section 103.
Here is the NAMB statement.
Here is a summary of the bill from the Financial Services Committee.
The April 24 webcast that of the hearing from Arpil 24 is available. Here is the link. In a previous post I had mistakenly attributed some comments that revealed a prevalent misconception with regard to yield spread premiums. The portion of the webcast that I heard is around the 1 hour and 30 minute point. The webcast gives a wide range of testimony.
In the portion of the webcast referred to above, an example is given that has a borrower qualified for a 5% rate but receiving an 8% rate. I really am not sure that is a realistic example. Perhaps some comments in the post can also address that question.
I am not really sure what is meant by "steering incentives." Perhaps someone can in a comment provide a definition of that term.
Here is the link to find your congressional contact, provided from NAMB website. http://capwiz.com/namb/dbq/officials/
Real estate professional and consumers alike should take some time to review the bill and to listen to the webcast.
In the bill and the webcast, the concept of Credit Risk Retention, skin in the game for all originators, is discussed. This concept and any legislation involving it have the potential also of drastic impact.
That "steering incentives" paragraph simply shows the bias and ignorance of the writers of this bill.
We're doomed.
Change was promised and now it is being delivered. It did not mean that we would like the change. My appraiser stated that he has to sign up with 200 plus agencies so he gets enough appraisals to make up the business.
Richard-
I'm not sure I understand the implications here?
Harry,
200 agencies, really. Wow. I don't know what to say. It starts Friday.
Richard
Ahh yes. Another cloudy clarification to further stir the already mirky waters.
Jim,
Actually I am with you, uncertain about the implications. My fear is that most of the legislators are also uncertain.
On the webcast, a comment was that the bigger danger is in doing nothing. That previous proposed legislation stalled because of uncertainty about unintended consequences, and therefore we had the mortgage crisis.
Do not think I agree with that conclusion.
The HVCC seems to me to be a disaster.
Yield spread premiums provisions seem to me to be based on false understandings and misconceptions. That scares me. NAMB has negotiated the existing language, and maybe they are comfortable with it. I am not sure what a regulator will be able to do with the language.
And I am not at all of the opinion that the current market supports what had in the past been abuses. We have time to work through YSP problems before the market place brings back subprime, alt A, and option ARMS - where the real abuses may have occurred.
The skin in the game concept may be the most dangerous for small companies, hence for consumer choice.
There are other provisions in the bill.
It is also scary to me that the some of the top practitioners of our industry (which would not include me) may not have had time to comment.
The mark up is today. We are just now learning of the legislation.
Richard
Jim,
Just to add to the above, it also bothers me the terms that we have allowed to be used in framing the discussion.
Predatory, kick back, steering.
These words do not represent what mortgage lending is about, and do not represent what mortgage brokering is about.
Richard
Thanks for the post and I will be reading the Bill.
Tim,
Thanks for commenting. We need to work to change the terms and the assumptions of the debate.
Richard
Hello. I'm an appraiser. Not only will we have to sign up with these appraisal management companies that just higher the first appraiser willing ot taek half the pay, they cost us appraisers hours of extra work because they sit by the phone and hound us for every little update. I had 12 phone calls/emails in 2 days for 1, yes 1, appraisal report that they were expecting. Then, they add additional requirements on top of what we already have to comply with. It's going to be nothing short of a cluster!
Angie,
So sorry. Here is a first hand account of dealing with the AMC's and expecting a centralized process involving a lender and the AMC to work through any appraisal issues. Things that used to be handled with a couple calls between professionals.
Another likely aspect of this, Angie, is that the people you are talking about do not have any idea about the broader issues of the loan. They may be only following mechanical prompts for followup.
Here is a link to another post that has infor to communicate , real and tangible issues with HVCC.
http://activerain.com/blogsview/1058450/HVCC-complaints
Thanks,
Richard
Has anyone been on mortgage outpost or broker universe? There are legitimate concerns about this all over it. I have personally wrote all of my congressman (several times) and signed any petition I can find. What our leaders do not understand is that many of the culprits and problems with the mortgage crisis are extinct. A nationwide licensing/background check, elimination of stated income, 2 year ARMs and 100% financing is enough change to sit back and see how the market responds in my opinion. They seem to trying to pass every single housing bill that comes through so they "can feel like they are doing something". They are going to overdo it and it will be very difficult to back track and get the housing market stable. The misunderstanding of YSP is very frustrating. I normally save my customers at least $1000 out of pocket money by making all of my profit in YSP. They keep their savings, the payment changes by $15 and everyone is happy; it is a win/win situation. Was it abused? Sure it was, but that doesn't mean it should be eliminated. I guess all we can do now is wait and see what happens unfortunately.
Lance,
YSP is under a very real attack on the House and Senate floors. The House is voting right now on the matter. It is sorely misunderstood.
Richard
We all know the passage of this bill into law is simply "scapegoating" the mortgage broker community as the responsible perpetrators of Predatory Lending. The uninformed conressmen, senator sand consumers do not see the negative effect. Reduced competition, Higher closing costs for consumers, less accountability by banks. Maybe the fight should be taken to the supreme court for allowing an unfair advantage and reduced competition. That may be the only venue in which we as an industry stand a chance to repeal this unfair legislation.
Most of these sellers are 52 years-old and above.
HR1728 has built-in age discrimination. Even though writing to senators will get some attention, it is not going to do much good in terms changing the language.
This is what will work.
- Find at least one 55+ owner in each state who has one or more "free and clear" properties and wants to sell. If you cannot find them in each state, then find a few in CA, TX, FL, NY, IL, PA, VA, etc., where most of the American population lives.
- Get him/her to lodge a discrimination complaint with their states' departments which handle age-based discrimination. For example, in Connecticut you they would contact Commission on Human Rights and Opportunities http://www.ct.gov/chro/site/default.asp
- Let the attorneys on states' payrolls fight the silliness in HR 1728.
Also, get AARP involved. This article may be relevant to educate people in the pervasiveness of age-based discrimination in America. http://researchnews.osu.edu/archive/agediscrim.htm