You may be saying that the mortgage industry deserves it…but your wrong. It’s not that simple. A majority of the mortgage industry are good hard people who truly care about helping home owners, continuing their education (without being forced to by regulation)…just doing what’s right (telling someone they should not refi or helping someone work on becoming better prepared to buy in the future instead of now). Yes, the mortgage industry does have it’s share of bad actors, as does many professions. The topic of why and who’s to blame has been covered quite a bit. What’s important right now is something that may be happening on Tuesday, November 6, 2007: HR 3915 is scheduled for a committee vote in the House of Representatives.
Here are some of the points I’m concerned about with HR 3915:
Eliminating YSP (Yield Spread Premium). YSP is compensation that mortgage brokers receive from lenders and they must disclose the "lender rebate" to borrowers. Often times, the YSP is used to pay for closing costs or to allow for a mortgage priced at zero origination. Both of these are benefits to the consumer. This may provide less options for a consumer working with a mortgage broker. Mortgage Bankers do not disclose what they’re paid "on the back end". Even though this portion of the bill may not directly impact me (since I work for a Correspondent Lender; I’m treated more as a banker); I still give this a thumbs down. Competition is good for consumers; this is what America is built on. Yes, I welcome a "smaller pool"; however, I only want the bad fish gone.
National Licensing for ALL Mortgage Originators…YEAH, if this is for ANYONE (broker, banker, or candlestick maker) who originates a mortgage loan for a residential property. I’ll eat a shoe if banks are not able to lobby their way out of being licensed. There would also be a national registry of licensed loan originators which would prevent unsavory LOs from crossing state lines. In addition, loan originators will be required to have a net worth of $100,000 or be bonded.
The "Net Tangible Benefit" Requirements. This could really squelch home owners being able to refinance. The LO must show there is a "net tangible benefit" to the home owner in order to refinance. How do you define that? This could cause investors to refuse to purchase loans, banks may refuse to issue loans and brokers would not be able to originate mortgages because the consumer could and would come back and say "you shouldn’t have sold me this loan". The potential for liability to all in the mortgage industry would be too great and many home owners would lose the option to refinance in circumstances that didn’t seem to provide a clear "net tangible benefit". This will impact mortgage bankers and mortgage brokers alike.
Bottom line, many in Congress don’t understand what they’re trying to regulate. Mortgages are complex. I’ve listened to more testimony from our elected officials and I believe (truly hope) that my clients understand more about mortgages than most of them do. Here’s a thought: before they can present a bill impacting mortgages, families who depend on a mortgage to purchase a home, livelihoods of mortgage originators; our Congress men and women should have to pass the mortgage competency exam. Why do we want someone making laws they don’t understand the full impact of?
I believe if this bill becomes law, it will actually harm consumers. The cost of mortgages may increase. There will be fewer mortgage options and fewer lenders willing to provide them. Competiton is good. Home owners should have the right to make choices about their financial future.
Here is a link to sign an online petition against HR 3915. If you’re a mortgage originator, real estate agent, appraiser or home owner; I encourage you to contact the House Committee of Financial Services to tell them about your positive experiences with your mortgage before Tuesday.