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June
2002
Sarbanes Unveils Anti-Predatory Lending
Legislation
Sen. Sarbanes (D-MD), Chairman of the Senate Banking, Housing, and Urban
Affairs Committee, introduced "The Predatory Lending Consumer Protection
Act of 2002" on Wednesday, May 1. The legislation is designed to
restrict abusive predatory lending practices, expand consumer
protections, and strengthen enforcement of existing protections in
current law by enhancing civil remedies and statutory penalties. The
section that most affects mortgage brokers includes the "Definition
of 'High Cost' Mortgage," which tightens the definition of a
"high cost mortgage" for which certain consumer protections are
triggered. The new definition, which amends HOEPA is as follows:
- first mortgages with APRs
that exceed Treasury securities by six (6) percentage points;
- second mortgages with APRs
that exceed Treasury securities by eight (8) percentage points; or
- mortgages where total
points and fees payable by the borrower exceed the greater of five
percent (5%) of the total loan amount, or $1,000. The bill revises
the definition of points and fees to be more inclusive. It allows
for two bona fide discount points outside of the 5% trigger.
For a complete summary of the legislation, go to
http://www.senate.gov/~banking/pss/predlend/summary.htm
Fed Delays Effective Date of New HMDA
Regulations until 2004
The Federal Reserve Board last week approved a final rule that postpones
the effective date of the recent amendments to Regulation C (Home
Mortgage Disclosure Act) from Jan.
1, 2003, to Jan. 1, 2004. On Feb. 15, 2002, the Board
published in the Federal Register amendments to Regulation C effective
for data collected beginning Jan.
1, 2003, and solicited comment on several related issues with a
comment period that closed on April 12. Financial institutions and their
trade associations requested a postponement of the effective date until Jan. 1, 2004, on the grounds that a 2003
deadline does not afford institutions adequate time to take the steps
necessary to ensure full compliance with the new rules. Consumer and
community organizations generally opposed postponement of the effective
date.
The
Board is, however, adopting an interim amendment to Regulation C,
effective January 1, 2003, mandating the use
of 2000 census data in HMDA reporting. Given the many changes that have
occurred since the 1990 census, use of 2000 census tracts and
demographics will produce more accurate and useful data in the HMDA
disclosure statements and aggregate reports.
http://www.federalreserve.gov/boarddocs/press/boardacts/
2002/20020502/
FHA Net Worth Increase Effective
Higher net worth requirements for FHA approved Title I and Title II
correspondents went into effect May 7. Loans applications received by HUD
before May 7 will continue to be processed and approved under the old
requirements, but originators sending FHA Loan Applications to HUD after
May 7 must have the higher net worth. The new net worth
requirements are: $63,000 for Title II correspondents and Title I
manufactured housing loan correspondents; and $32,000 for Title I
property improvement loan correspondents.
HUD Jr. Chief of Staff Resigns
Junior Chief of Staff of HUD, Robert Woodson, has resigned his position.
He plans to work with an affordable housing foundation founded by his
father, Robert Woodson, Sr., president of the National Center for Neighborhood
Enterprise. Woodson has served at HUD since the Bush-Cheney transition
period following the 2000 election. Prior to becoming Chief of Staff in
March, Woodson had served as Deputy Chief of Staff for Policy. He served
as a senior housing policy advisor to President Bush's campaign.
OTS Introduces Proposed Amendments to
the Parity Act
This week the Office of Thrift Supervision (OTS) proposed amendments to
the Alternative Mortgage Transaction Parity Act (Parity Act), which would
remove the parity existing between certain federally regulated
institutions and "housing creditors" in connection with certain
loan terms. Specifically, the proposed amendments would eliminate §
560.34, which governs prepayment penalties, and §560.33, which governs
late payment charges, from the list of regulations designated for
alternative mortgages. Thus, these preemptive provisions would no longer
be available to state-chartered housing creditors. Further, OTS would
eliminate the $5 limit on late payment charges for first lien mortgage
loans on manufactured housing. Finally, there is a clarification that a
reverse mortgage is not limited to a loan that provides for periodic
payments, but also includes a loan that provides for a lump sum payment.
The OTS
also recommends certain statutory changes to the Parity Act. It believes
that Congress should revisit the Parity Act, in the context of broader
mortgage reform legislation. It also recommends that if the Parity Act
does remain in place, states be permitted another opportunity to opt out
of the preemption provided by the Parity Act. Also, it recommends that
state housing creditors lending under the authority of the Parity Act be
required to identify themselves to the states. The comment period ends
June 24.
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