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September
2001
Neill Fendly,
CMC, Represents NAMB at Senate Banking Committee Hearings
On July 26th and 27th, the Senate Banking Committee held hearings on
"Predatory Lending: The Problem, Impact, and Responses." The
first day's hearing featured four borrowers who told how they ended up
with mortgages they considered predatory. Other witnesses included Iowa
Attorney General Tom Miller; Steven Prough, CEO
of AmeriQuest Mortgage; Dr. Charles Calomiris of Columbia University and the American
Enterprise Institute; and Martin Eakes of the
Self Help Credit Union in North Carolina. The second day of the hearings
featured consumer advocates and industry representatives. The consumer
groups testifying included AARP, National Community Reinvestment
Coalition, Leadership Conference on Civil
Rights, ACORN, and National Consumer Law Center. Industry witnesses
included American Financial Services Association, NAMB, MBA, Credit Union
National Association, and National Association of Affordable Housing
Lenders. The senators seemed most interested in restrictions on single
premium credit life insurance, mandatory arbitration, and flipping. The
senators also seemed quite interested in simplification of the mortgage
process and improvement of disclosures, which are strongly supported by
mortgage industry groups. Committee Chairman Sen. Paul Sarbanes (D-MD)
said, in concluding the hearings, that if industry wants Congress to
preempt state laws, it must be prepared to accept more stringent federal
standards. Read Neill's testimony at www.namb.org/members_only/gov_affairs/
Predatory_Lending/senate_testimony.asp
Amicus Brief Filed in Culpepper Case
Irwin Mortgage filed a petition for rehearing the June 15th decision in
the case of Culpepper vs. Irwin Mortgage Corp., asking the full court to
review the three-judge panel's decision. NAMB's
general counsel, Lotstein Buckman,
prepared and filed on July 18, an amicus curiae (friend of the court)
brief on behalf of NAMB, showing the association's significant interest
in the outcome. The brief outlines NAMB's
arguments, which include: 1. The decision is in conflict with the intent
of HUD in its policy statement. 2. The decision places mortgage brokers
in the position of possibly committing criminal acts unwittingly. 3. The
decision begs the question of whether a referral fee exists in
approaching the proper construction of the first step in HUD's two-step
analysis.
Rep. Schakowsky of Illinois Intends to
Introduce More Predatory Lending Legislation
Congresswoman Jan Schakowsky (D-IL) and Congressman Bobby Rush (D-IL)
announced on July 16 their intentions to introduce more predatory lending
legislation in Congress before the end of the year. Last year, Schakowsky
introduced her own package of predatory lending bills, however, she
failed to get co-sponsors and the bills fell by the wayside. With
Minority spokesman John LaFalce (D-NY) already the sponsor of
legislation, it's unlikely that any new bills will be pushed by the
Democrats until LaFalce gets an opportunity to have his say.
FHA Eases Refinance Rules Again
The FHA is making it easier to finance upfront mortgage insurance costs
when borrowers want a streamlined refinancing without getting an
appraisal. Only two months ago, the FHA relaxed its guidelines so
borrowers could use the equity in their homes to finance closing costs-up
to the original amount of the loan. Now the agency has clarified the May
7 guidance (Mortgage Letter 2001-12), saying that streamlined refinancings are allowed to exceed the original loan
amount to cover upfront mortgage insurance premiums. "If subject to
an upfront MIP, the new absolute maximum mortgage on such transactions
would equal the original principal balance plus the new upfront
MIP," the FHA said.
Sen. Allard Introduces Lenders
Disclosure Legislation
Sen. Wayne Allard (R-CO) introduced legislation July 20, to require
mortgage lenders and reporting agencies to disclose credit scores related
to home mortgages to consumers. Entitled the Consumer Credit Score
Disclosure Act of 2001, it was endorsed by the National Association of
Realtors and the Consumers Union. The bill would require mortgage lenders
and credit reporting agencies to disclose credit scores to mortgage
applicants, and would require credit reporting agencies to inform
applicants about the factors that went into their credit score, who
created the score and how the score can be improved. The bill is expected
to be the same as S3603 introduced last year by Sen. Schumer. Similar
legislation was enacted last year in California, for which the
California Association of Mortgage Brokers strongly supports.
HUD Shares Goals for 2002
"The Fiscal Year 2002 Annual Performance Plan" released this
week describes HUD's goals for the coming year, if Congress funds HUD
programs at the requested levels. The plan shows how HUD expects to
promote adequate and affordable housing, economic opportunity, and
suitable living environment free from discrimination, primarily by
achieving five strategic goals. HUD's strategic goals are: to increase
the availability of decent, safe, and affordable housing in American
communities; to ensure equal opportunity in housing for all Americans; to
promote housing stability, self-sufficiency, and asset development of
families and individuals; to improve community quality of life and
economic vitality; to ensure public trust in HUD. The Annual Performance
Plan is divided into five sections, each focusing on one of HUD's
strategic goals and objectives within that goal. The plan also includes a
brief description of HUD programs.
www.huduser.org/publications/polleg/fy2002app.html
FHA to Hike Multifamily Premium
The FHA raised its multifamily insurance premiums from 50 to 80 basis
points beginning Aug. 1, according to HUD. The expected 30-bp premium
increase is designed to free the multifamily loan program from its
dependence on the appropriation of credit subsidies by Congress. The
multifamily program has been shut down since April because of lack of
credit subsidy funds, and it is not expected to reopen until Oct. 1 when
the government's new fiscal year begins. Meanwhile, the FHA plans to
issue a mortgagee letter that notifies lenders with firm commitments
based on 50 bp premiums that they will have to requalify their projects at the higher premium level.
California Bill Would Restrict Lending
Practices Further
A bill setting restrictions on high-cost loans (AB 489) was amended July
12 by Sen. Mike Machado, chair of the Senate Banking Committee. The
proposed legislation was originally intended to prohibit real estate
brokers and agents, banks, savings associations, and lenders who make
high-cost loans to consumers whose income is at or below 120 percent of
the median income for the area from engaging in certain practices. These
practices included: a refinance that results in no economic benefit,
selling additional products in the loan agreement, making a loan without
regard to a borrower's monthly income and charging fees for loan services
that bear no reasonable relationship to the value of the services
performed. The amended bill is broad and vague, as well as imposes large
penalties and fees for technical non-compliance with RESPA and TILA. Also
in California, local predatory
lending ordinances have been introduced in Oakland and Sacramento. Los Angeles city council
members have plans to introduce an ordinance in Los Angeles soon.
New York State Assembly Passes Predatory
Lending Legislation
The New York State Assembly passed predatory lending
legislation (7828-A) July 17 with bipartisan support. The bill would
prohibit certain practices with respect to high-cost loans that carry an
APR of 5 percent or more above the US Treasury interest rate or have
points and fees that exceed 5 percent of the total loan amount. The
legislation would apply to any lender acting in bad faith that tries to
avoid the bill's provisions by splitting or dividing a high-cost loan
transaction. If acting in good faith and failing to comply, the bill
states that there is no violation if he notifies the borrower of the
compliance failure within 30 days of the loan closing and appropriate
restitution is made; or the compliance failure resulted from a bona fide
error. The bill also makes mortgage brokers agents of the lenders and
requires persons violating this section liable to the borrower for actual
damages, statutory damages, costs and attorneys' fees. The bill will now
be considered by the state Senate.
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