Mortgage Reform and Anti-Predatory Lending Act of 2007

This post is directed to all of our fellow brokers. While consumers may also find significant disadvantages to this new bill, it is the Mortgage Broker that will feel the full effects! Brokers throughout the country will have their ability to obtain & maintain licensing, ability to make money and ability to act in the best interest of the borrowers severely crippled. It is projected that 60% - 80% of brokers could be out of business within 6 months of the bill taking effect.

In short, the financial requirements ($100,000 net worth) are out of reach for the average small broker, the YSP will be eliminated (or significantly reduced) and it will be difficult for many of the already realing mortgage brokers to hang on. Read on below...

**** Below is a copy of the e-mail NAMB sent out ****
Some information has been removed for privacy purposes & to shorten

Mortgage Brokers are being singled out unfairly - please act!

From: NAMB Government Affairs
Sent: Wednesday, October 31, 2007 3:05 PM
Subject: NAMB Teleconference to Discuss H.R. 3915

To: All NAMB Members

From: Denise Leonard, NAMB Government Affairs Chair

RE: National Teleconference to Discuss H.R. 3915 the "Mortgage Reform and Anti-Predatory Lending Act of 2007"

Mortgage brokers are facing extinction. The U.S. House of Representatives is considering a bill that will fundamentally change the way we are paid, outlaw YSP, and legislate underwriting guidelines into law. Additionally, we fear that all subprime lending will cease to exist due to excessive lender liability. It is important that you read this memo.

We are calling upon our members to respond as never before. To save our industry, we are asking you to learn about this threat and then contact your congressman.
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Commentary: We urge you to read the balance of this memo and the attached information before you listen to our teleconference.

On Monday, October 22, 2007, House Financial Services Committee Chairman Barney Frank (D-MA), along with Representatives Miller (D-NC) and Watt (D-NC), introduced H.R. 3915, the "Mortgage Reform and Anti-Predatory Lending Act of 2007." Below you will find the full H.R. 3915 bill, a section by section summary, the NAMB Press Release, and NAMB’s Testimony presented before the HFSC.

The bill contains three sections. Title 1 will create a federal duty of care and outlaw steering. The anti-steering language will outlaw incentive compensation and YSP that varies with the terms of a loan. The section will allow indirect compensation if disclosed early in the process. This section also creates a minimum licensing standard for all originators and net worth or bond requirements of $100,000.

Title 2 creates an ability to repay standard and hardwires underwriting guidelines. Underwriting will include a verified ability to repay and take into account amortizing payments. Guidelines will also include taxes and insurance payments when calculating ratios. For refinancing, the act will define and require a net tangible benefit. For prime loans, there is a safe harbor. However, for subprime there is assignee liability and expanded rescission rights. Standards will also create a defense to foreclosure. Severe restrictions will be placed upon first-time homebuyer mortgages with negative amortization features.

Title 3 will expand the existing Section 32 of TILA by reducing the points and fees triggers and expand lenders liability. Prohibitions include no balloon loans, no lending without regard to ability to repay, prohibit a pattern or practice of making such loans, restrict late fees, and prohibit the financing of any points/fees. Taken together, the expansive liability and prohibited terms and conditions will make Section 32 lending practically impossible.

This is a critical time. Do not miss this important teleconference!
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We have recently taken steps to ensure long-term security and viability, for both our employees and customers. As a lender, we still have the flexibility of a local broker, but have the safeguards in place to avoid the upcoming crisis in the mortgage industry.

If you don't have FHA...forget about it!

If you are a GA, FL, SC, TN, NC, VA, or AL mortgage broker, you should contact me to learn how I can help you get positioned to make more money (not less) and gain security for you, your employees and your customers.