Good Afternoon,

When I was taking drivers education in high school, one thing I remembered was how to respond when your car spins out of control. Most people would slam on the brakes and pull the wheel in the opposite direction thinking it will bring the car under control, when the key is to easy your foot off the gas and gently steer the car back under control. Hopefully you will remember this if nothing else in this article.

While most of the proposed bill provides much needed regulation, somethings in this bill (in particular the elimination of yield spread premium or YSP) is the drastic re-correction that could cause the market to spin out of control. YSP allows for a borrower to tailor their closing costs to their budget and financial needs, such as low or no point options. Eliminating this would drastically raise closing costs thus making loans unaffordable for many borrowers (in particular first-time home buyers). This bill is a big step in the right direction, but still needs more consideration before a move is made that could possible send us further down the abyss.  More information to follow as talks continue.

Conforming rates for 100% financing remain constant while the lower LTV's decreased by 0.125%. Sub-prime rates remain constant.  Have a great weekend!!!

Sweeping Bill Could Radically Alter the Mortgage Industry

Posted on Wednesday, October 24, 2007 fromMorgageLender.com

Democrats unveiled a sweeping predatory lending bill would - among other things - eliminate the Yield Spread Premium (YSP), create a national broker registry, end prepayment penalties on subprime loans, and extend assignee liability to investors on the secondary market for loan performance.


The Mortgage Reform and Anti-Predatory Lending Act of 2007, or H.R. 3915, represents one of the most comprehensive efforts at mortgage industry reform by House Financial Services Committee chairman Rep. Barney Frank.

The bill is the product of numerous private and public discussions Frank has held all year with representatives of the mortgage industry, regulators, consumer groups, lawmakers and other related groups.

The new legislation would require that all mortgage originators to hold licenses under state or federal law, and would force lenders to be reasonably sure borrowers are able to repay the loan they are offered.

Every loan document would identify the originator under the national registry.

The bill would require criminal background checks, testing to demonstrate basic knowledge of loan products and continuing education and professional ethics training for all originators.

At the onset of the loan process, loan originators would have to provide a simple, straight-forward disclosure of their role in a mortgage transaction, including all fees and other sources of compensation.

Another of the bill's provisions would reduce the "points and fees" trigger for "high-cost loans" under the Home Ownership and Equity Protection Act (HOEPA) from 8% to 5% and include all costs and fees charged to the borrower.

The bill would also prohibit lenders from steering borrowers to more costly loans, eliminating the use of yield spread premiums.

A wide spectrum of federal regulators - including HUD, OCC, OTS, and FDIC - would draw up the regulations prohibiting originators from steering consumers toward a loan "not in the consumer's interest."

If a securitized subprime mortgages lacks income documentation, the bill would allow borrowers to rescind the loan and recover transaction costs on the stated-income loan.

While the bill would prohibit prepayment penalties on subprime loans completely, prepayment penalties on a prime loan would have to expire at least three months before interest rates reset on a prime adjustable-rate mortgage.

The proposed legislation would also extend some liability to certain parts of the secondary market to ensure that investment banks and others securitizing the loan fundings monitor them for quality and underwriting standards.

If secondary market investors follow certain due diligence and other practices, the bill allows for the creation of safe harbors to shield them from liability.

U.S. Treasury Secretary Henry Paulson has argued that assignee liability could scare away investors and further damage both the mortgage market and the larger economy.

The National Association of Mortgage Brokers (NAMB) issued a mixed response to the proposed bill.

The group applauded the creation of a national registry and new disclosure rules, but voiced serious concern about several provisions, particularly the elimination of the YSP.

"The indirect compensation mortgage brokers receive from lenders is a defendable fee that actually lowers closing costs to consumers," said NAMB President George Hanzimanolis.

"It is an imperative tool for first time homebuyers, and critical to enable so many people to own a home and manage their finances."

NAMB also suggested that many lenders will reject making loans at the heightened HOEPA threshold, which Hanzimanolis likened to government sanctioned ‘red-lining.'

"These restrictions are going to cut off credit to people who are generally in lower economic areas who deserve and need credit," said Hanzimanolis.

The Mortgage Bankers Association (MBA) chose not to address the legislation directly, and only welcomed a "full and open debate on how to best protect consumers."

*FLEX 100 PROGRAM

** Loan contains 3 yr pre-payment penalty

All Rates assume financing for a single family/condo,

primary residence, full documentation, 30 yr fixed. For other property,

occupancy, documentation and loan types, please call for pricing.

Rates subject to change

****COMMUNITY LENDING SPECIAL ****

6.875%  - 100% Financing, single family/condo, primary residence

w/ 600+ credit score. Rate is for approval thru community lending program.

Applicant income cannot exceed $80,200 for Hartford County or property

must be located in low-to-moderate income census tract.

Rates subject to change 

6.00%  - 97% Financing, single family/condo, primary residence

Rates subject to change

Do not hesitate to call regarding any scenarios or questions. I'm always here to help!