Lending In The House

The Mortgage Reform and Anti-Predatory Lending Act of 2007, also known as HB3915, was resoundingly passed recently in the House of Representatives.

The three main provisions of the Bill that offer consumer protection are:

1. A National Registry of All Mortgage Originators – This will give consumers the most protection because it means that all mortgage originators, including banks and lenders who break the law will not be able to move from state to state or mortgage company to mortgage company without detection.

2. Enhanced Professional Standards for all Mortgage Originators – This creates a system of criminal background checks, fingerprinting, education and pre-licensing for all mortgage originators no matter where they work. However, loan officers and federal depository institution employees need only register with the national registry system, but do not have to participate in the enhanced education and testing.

3. Preservation of Mortgage Originator Compensation and Consumer Financing of Points and Fees – The original bill called into question the legitimate payment of the Yield Spread Premium, as well as the consumer’s option to finance points and fees into the loan (or obtain a no-cost loan). Working with House Financial Services Committee Chairman Rep. Barney Frank (D-MA) and Representative Gary Miller (R-CA), NAMB was able to obtain clarifications that preserves the ability of consumers to finance origination fees, points and other closing costs into the loan rate or amount, and preserves the ability of originators to receive payment in such cases.

This is a strong victory for the NAMB and the consumers that are served by the Real Estate and Mortgage Professionals that work with them. Even with this victory, there are some drawbacks. Locate in Title III, there are some provisions that NAMB did not support. The feeling is that there will be a wide-range “negative impact on the availability and affordability of all credit.” Unfortunately, this will affect those with imperfect credit histories, including individuals looking to refinance.

The Senate is now considering FHA reform. Also, a bill on Mortgage Reform is being worked on. HUD’s new Good Faith Estimates and other reforms including new Federal Reserve Board regulations dealing with unfair and deceptive practices are forthcoming.

Overall, it is good news that Mortgage Lenders, consumers and others involved in the lending process will enjoy higher standards, which will lead to better performance and a more positive outlook and outcome for everyone.