The current buzz in the mortgage business is worry about what our legislators are planning for all professional mortgage lenders because of the nationwide uproar (i.e., media frenzy) over the “Sub-Prime Meltdown and National Housing Crisis”, which as you know, was caused by the acts of some bad loan officers, some peculiar loan programs and a whole set of circumstances previously discussed here. This morning I received the following summary from the Mortgage Bankers Association (mortgagebankers.org) of their first shot over our bow. I will place any of my own thoughts and opinions in italic type. For the most part, I think the legislation is just fine, but I’m always concerned when people who don’t have real jobs (politicians) get involved in making decisions regarding my livelihood.

“The House of Representatives passed H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, on November 15, 2007 by a vote of 291-127. The Senate will likely develop its own, substantially different, mortgage lending reform legislation, and we expect the vehicle for that to be a forthcoming bill by Banking Committee Chairman Chris Dodd (D-Conn.). Any differences between bills passed by the House and Senate would have to be worked out in a conference committee before being sent to the President for enactment. Here is the MBA’s summary of H.R. 3915:

●Requires registration for all originators and minimum standards for state-licensed originators. Excellent! The only requirement now in the state of Georgia is that a prospective mortgage loan officer be hired by a licensed mortgage lender or bank and print up some business cards. They’re not presently required to even know how to spell the word, “mortgage”.

●Establishes new anti-steering provisions that limit yield spread premiums (YSPs) and equivalent compensation for mortgages that are "not qualified mortgages." “Not Qualified Mortgages” is their buzzword for subprime loans. As I understand this section, a loan officer would be prohibited from steering a customer away from a standard loan for which they would qualify, to a subprime loan in order to earn more income for the loan officer in the transaction. My opinion is that the loan officer who knows or should know that a customer qualifies for a standard program, but then steers that customer to a higher interest rate subprime loan for greater personal profit should be shot in at least one kneecap. That way, consumers could just avoid mortgage lenders that limp.

●Requires that a lender determine in good faith that a consumer has the ability to repay his or her mortgage and that refinance loans provide a net tangible benefit. Note: "Qualified mortgages" and "qualified safe harbor mortgages" would be presumed to meet these requirements; the presumption is rebuttable against lenders for "qualified safe harbor mortgages." “Qualified mortgages” is their buzzword for standard mortgages, i.e. FNMA, FHLMC, FHA and VA. The term is also used in the legislation to include limited documentation or no documentation loans commonly referred to as Alt A or “liar loans”. “Qualified Safe Harbor Mortgages” is a designation used in the legislation to describe a better class of subprime loans. This would include subprime loans with fixed rates, documented income and assets, no prepayment penalties, no negative amortization and stricter underwriting requirements.

●Prohibits prepayment penalties for "not qualified mortgages." No complaints from me.

●Would expand the coverage of the Home Ownership and Equity Protection Act (HOEPA) and its restrictions governing high-cost mortgages.

●Includes numerous other provisions including facilitating and funding counseling programs and requiring counseling for some borrowers, establishing new escrow and appraisal requirements including requiring escrow accounts and appraisals for certain borrowers, and establishing new disclosure requirements for all loans. Mortgage lenders are used to paper work. We’ll get used to any new paperwork requirements. Politicians and attorneys love to have more documents. They must hate pine trees. Finally, two other provisions of the legislation that I particularly like:

The bill would prohibit any person with an interest in the loan transaction to influence the judgment of the appraiser, through prohibiting coercion, extortion, collusion, inducement, bribery or intimidation. The bill provides civil penalties for first violations and additional costs for subsequent violations.

The bill would authorize $31,250,000 from 2008 through 2012 for new employees at the Department of Justice dedicated to combating mortgage fraud, and $750,000 for the same period for additional funding for a mortgage fraud interagency task force.”

David Griffin has been financing homes in Macon, Warner Robins and all of Middle Georgia since 1983. He is a two-time past president of the Mortgage Bankers Association of Middle Georgia. For an archive of past articles visit www.davidjgriffin.com. (11/29/07)