Posted on 11/06/2007 10:18:14 AM PST by Hydroshock
WASHINGTON (Dow Jones/AP) -- House Financial Services Committee Chairman Barney Frank, D-Mass., has secured two key Republican endorsements on his legislative plan to reform the mortgage industry, avoiding a potentially bruising political fight this week.
Rep. Spencer Bachus, R-Ala., the panel's top Republican, and Rep. Judy Biggert, R-Ill., another high-ranking member, have both signed on as co-sponsors to an amended bill that Frank plans to introduce before a committee vote on Tuesday.
"The most important fact about this compromise is that it has significant new safeguards to protect families from abusive lending," Bachus, who has long advocated for change in the mortgage industry, said in a press statement. "This is the culmination of discussions that began two years ago when I sent chairman Frank an outline for a subprime lending bill."
Among the changes, the bipartisan amendment includes the Federal Reserve among the regulators that would be responsible for implementing the new law. Also, the bill clarifies new secondary market liability.
"In addition to significant consumer protections, the bill also provides carefully crafted assurances that frivolous lawsuits will not disrupt the ability of capital markets to continue to provide the liquidity necessary to assist families to achieve the dream of owning a home," Bachus said
(Excerpt) Read more at money.cnn.com ...
bring back usery laws that somehow became vapor, reinstate bankruptcy protection, and get rid of credit reporting.
I am glad to see that this bill, which, if passed, would bring devastation to the housing market, the general consumer, and to the economy, has finally made it out of the shadows and into the mainstream where the public can view it and judge it. And judge it they should.
This monstrous, badly written bill is a classic case of the road to hell being paved with good intentions. Barney Frank no doubt has glossed over the full spectrum of the bill’s tenets when he brought the Republican endorsements on board, as most of the politicos don’t have time to read or digest the stack of documents piled on their desk. What I am sure that Mr. Frank said to swing the endorsements his way is that this bill represents sweeping changes that are desperately needed in the industry, but did not disclose the full ramifications of ALL of the Titles of this bill. I wholeheartedly agree that the predators that have a tendecy to swim around this industry (or for any other industry, for that matter) need to be reined in and held accountable for misdeeds and bad practices. But to force loan officers, originators, and mortgage brokers to carry exorbitant bonds is tantamount to the government invoking a police state on an industry that comprises a great portion of the economic structure in the U.S. The bill and its vastly vague wording opens the door for loose interpretation of the law, thereby giving those same lenders who contributed to the current economic debacle free license to charge extortive rates and make it difficult for all but the priveleged to achieve homeownership. The mortgage brokers in this country have long been a buffer between bank high retail rates and what the customer can afford. Taking them out of the picture makes the consumer a fatted calf, ripe for the slaughter. And even should the broker manage to stay in operation with all of the overhead costs piled on him, he will ultimately find failure when he has his source of income sheered asunder.
Yield Spread Premium (YSP) is a misunderstood facet of mortgage lending. It represents the cost of doing a loan, contrary to popular beliefs held by uninformed people. Yes, YSP can generate big bucks for the unscrupulous, but when utilized by those with ethics and an interest in doing business for longer than a couple of months, it represents a cushion by which the homebuyer can survive the closing of a home loan. The profit generated through YSP often absorbs a hefty portion of closing costs, particularly for those people whose personal liquidity is in short or non-existent supply. Take away that facility, and you will find fewer and fewer homeowners (who have the credit, but not the money to do a loan), and you will find a much different, but equally explosive economic situation. Competition dies down, and prices/rates go up. The lenders who push inflated retail rates (and who do not have to disclose their SRP (Service Release Premium- the money paid to lenders when they sell a pool of mortgage loans on Wall Street), although the SRP is considerably more than any broker will ever see on a single loan) will go unchecked and the economy will see inflation on a biblical scale.
H.R. 3915 represents some good points, but in its current state is a powderkeg with a few that will burn down within the first eighteen to twenty-four months after the law goes into effect. But by that time, the country will be rocked to its very economic foundations, a situation for which we may not easily recover.
In summary, please urge your Congressmen and Congresswomen to vote NO on this bill, send it down for revision, and help safeguard the consumer, the housing market, and sveral hundred thousand jobs.
So why does the American taxpayer, especially one(s) raising a family, buying a home now, is frugal, saves, and budgets need to foot the bill? Anyone thinking that those affected are entitled to a bail out the builders and the wages paid to the illegal construction workers with no Workman’s Comp bennies paid to the states by their employers (but free medical if hurt on the job), plus the salaries of the real estate agents, mortgage lenders, and dividends to the stock investors for nothing but a simple “GREED RUN”????
Your comments are some the best and most thoughtful I have seen written on this subject. I have beeen in the industry for 8 years as both a loan officer for large banks and now on my own as a broker. If this bill comes to pass the consumer who is looking to buy a home will get raked over the coals. In all my years, the most unscrupulous lenders I saw in the business were the big banks, not the small broker. Since they are not required to disclose YSP and SRP, no one knows the money they have collected hand over fist. I am not sure why more isn’t being said about the trillions in mortgage income Bank of America, Wells Fargo, Countrywide and others made off of sub prime and prime loans.
Somebody should tell Barney the horses have already been stolen from the barn.
The very first incling I got that this was going to be bad was several years ago when my wife was a real estate agent. At that time, to get a mortgage the total payment could not be more than around 30% of your DOCUMENTED take-home pay. It had been around that level for as long as I can remember.
Then the rule suddenly changed and it became 50% of your DOCUMENTED take-home pay. I said to her that the industry was pumping previously unqualified buyers into the market and it will increase prices.
When you look back on it, I should have bought all the homes I could as investments. Who knew that those days of 50% would seem downright stifling compared to the drunken sailors rush we digressed to. The writing was on the wall way back then. I just didn’t realize how silly the whole thing would get.
We will all suffer the consequences - some more than others.
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