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HR 3915 Legislative Update

HR 3915 Legislative Update

The House Financial Services Committee approved H.R. 3915 by a vote of 45-19. This clears the way for the bill to be voted on by the full House of Representatives as early as the week of November 12. If it is passed by the House, the bill will be sent to the Senate for their modifications and/or approval. If the Senate modifies it, the House will need to approve the modified version before it is sent to the President and signed into law. Therefore, there is still quite a ways to go before this bill actually becomes law, and even then it will likely look different than its current form. On a good note, the bill has been amended to remove the burdensome net worth and surety bond requirements that were originally included. The bill has also been amended to allow yield spread premiums (YSPs) on prime loans. However, even the amended bill has several dangerous elements that will severely impact the industry if passed into law:

No YSPs on sub-prime loans - this would result in higher points and refinancing costs for these borrowers
"Net tangible benefit" requirement on non-prime loans - this could be very subjective and open up the industry to costly lawsuits
"Ability to repay" requirement on non-prime loans - this could also open up the industry to costly lawsuits and would probably result in the elimination of all stated income and reduced documentation sub-prime loans

I hope this has been useful. The following are some helpful links to gain additional insight:

(House Financial Services Committee Press Release & Summary of Bill)
http://www.house.gov/apps/list/press/financialsvcs_dem/press110607.shtml
(Summary of Manager's Addendum to the Bill)
http://www.house.gov/apps/list/press/financialsvcs_dem/summary_of_manager's_amendment_11_05_07_v2.pdf

Posted by Connecticut FHA LOANS,CT VA Loans, CHFA CT First Time Home Buyer:CT CHFA Loan on 11/09/2007 07:28 AM

Comments (4)

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4 Comments on HR 3915 Legislative Update

NOV

2007

The sub-prime business was a joke in the past. Banks should have known better than to lend money to weak borrowers so easy. Bank sub prime guidelines weakened the real estate business, and it will take the next 2-5 years to mend this. Very unfair to have taken advantage of un knowing buyers this way. Maybe some legislation will make a difference.... and so will the share holders.

I agree Concetta, and I think the ones that went under deserved it.... There were a lot of poeple including Realtors who really did not care about the borrowers, just saw that jack pot at the closing!

Good post Leo.

Unfortunately most consumers and Realtors do not realize that the Banks and Large Investors are the players in the market that determine the qualifying and underwriting methodology that allow borrowers to take out a loan. Those large banks and investors are the parties that will benefit from the bill because H.R. 3915 does not do anything to regulate them directly. It just seeks to regulate the smaller companies and businesses that sell the Banks and Investors' products. Does that make any sense?

See other blog link:
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=2112

"...scoundrels support this bill. A free market would allow for upstart competitors to gain market share from the wounded giants. Rather than suffer from their poor lending practices, big lenders will benefit from the high barrier to marketplace entry this bill promotes."

Other links:

http://proprietornation.blogspot.com/2007/11/villains-of-hr-3915.html

http://www.namb.org/namb/NewsBot.asp?MODE=VIEW&ID=216&SnID=1672263818

My take:

The proposed legislation is a cynical attempt to scapegoat the mortgage brokerage industry for the problems associated with poor lending practices formulated by the banking industry, whose products the mortgage brokers sold to consumers.

The large institutional lenders are trying to pass the blame on to smaller players in the industry, who lack the power and influence that the largest banks wield in Washington D.C. Many punitive measures are aimed at the mortgage brokerage industry, while ignoring the root of the problem, the lenders who developed and promoted the mortgage products that precipitated an increase in the foreclosure rate, and a de-stabilization in the value of loans sold on the secondary market.

To that end, the proposed legislation is designed primarily to eliminate competition from brokers and consolidate market influence among the most powerful lenders and banks.

This bill would damage the American public's ability to 1) obtain competitive mortgage products and services, 2) to choose an independent advisor to help them obtain solutions to their unique financial needs, and 3) to experience the American Dream of Homeownership without satisfying undue restrictions and regulations (that were written by, and serve the industry giants).

The proposed bill would create many unintended problems due to its hidden motives and real intentions.

I hope everybody wakes up and sees what is going on, so that the marketplace remains compeititve and the true scoundrels are exposed.

Keep up the good work.

Christopher Sartorius
Carteret Mortgage

Leo,

The good news so far is that the original bill has already been amended in the brokers' favor and let's hope that when it goes to the Senate the same trend continues. Definitely looks like the large banks are out to squeeze the broker community.

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