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The Mortgage Consumer Protection Act / My Solution

By William J. Archambault, Jr.

Services for Real Estate Pros with The Real Estate Investment Institute 1retiredsage

April 15, 2008 06:37 AM

In order to protect the consumer in mortgage origination the following changes shall be made:

1. The states shall licence all mortgage brokers and their agents. Standards shall be set by the individual states, but records shall be maintained so that the public may be made aware of individual complaints. Agents fired for cause shall not be re-licenced without review. Agents may only work for one broker at a time.

2. Brokers, and corporate owners (et. al.) controlling 10% or more of the voting interest, shall be joint and severally libel for the actions of the brokerage and their agents. Agents shall be joint and severally libel with their broker for their actions.

3. Brokers shall maintain a fiduciary with the consumer. Bankers by their nature owe their fiduciary to their bank. Fiduciary shall be disclosed to the consumer.

4. If found guilty of any crime involving their professional fiduciary in addition to any other punishment fines shall total at least three times the gross revenue from the crime.

5. No mortgage brokerage or mortgage bank shall have common ownership with a real estate brokerage, builder, or any entity selling real estate beyond their personal properties.

6. The "Good Faith Estimate" shall be amended as follows:

A. All brokers and non-depositary bankers shall disclose all fees to be collected or anticipated, regardless of source as "Origination" no other fees shall be allowed. (Anticipated fees, shall be included in the total and disclosed individually.) Once disclosed their Origination fees may not be increased, regardless of changes in the market, bankers receiving more than the disclosed anticipated fees shall refund the difference to the borrower.

B. "Good Faith Estimate" shall quote rates that can be locked for at least 30 days.

C. Pre-paid interest, used solely to adjust the due date of the first payment, shall be disclosed in an amount equal to 30 days interest. Said pre-paid interest shall not be included the pre-paid finance cost, pfc.

D. Third party fees shall be marked as to whether they are known and accurate or estimates. Those fees that are out of the lenders control and always estimated shall be totaled separably.

7. "Truth in Lending" form shall be amended as follows:

A. Pre-paid finance cost, pfc's, shall not be listed as PFC's, escrow charges shall be included only on refinance loans.

B. When calculating Annual Percentage Rate, APR, the term shall be adjusted to the lesser of 7 years or the term of the loan.

C. When calculating Annual Percentage Rate with regard to refinancing, all cost on the existing loan relevant only to the early payoff shall be included in the PFC's.

The break even term, cost of the new loan divided by the savings in principal and interest shall be determined. Long term savings or cost shall be determined, total payments of the new loan less total remaining payments on the existing loan less cash proceeds.

D. Adjustable Rate Mortgages, ARM's shall be disclosed to the worst possible scenario. ARM's that have a reduce starter rate shall declare so and included a notice that "Your rate will go up."

8. Loans including a "Pre-payment Penalty" shall prominently display the term and terms of the penalty on the "Truth In Lending" form and if the penalty can be bought out including the cost of the buy out.

9. Brokers, bankers, and their agents having a prior and higher duty to promote civile rights shall not be libel for the consumer accepting a less than desirable loan provided that they have meet all required disclosures.

10. The states shall be encouraged to promote an "exclusive right to finance" contract between consumers and lenders.

These changes only affect the smallest part of the total crisis, the point of loan origination. The major problems are at the intermediate and lender level, but if left alone these will self correct.

Bill

William J Archambault Jr

The Real Estate Investment Institute

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Jason Sardi

Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC

Your Agent for Life

Lots to chew on Bill, I'll be back. I do like a lot of what I'm reading so far....

Apr 15, 2008 06:42 AM

William J. Archambault, Jr.

The Real Estate Investment Institute - Houston, TX

Thanks, Jason,

I look forward to your full considered opinion.

And you beat Jeff again, maybe I should call him when I'm about to post? :-)

Bill

Apr 15, 2008 06:49 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Bill... these are very good. I do disagree with 6A though... "Once disclosed Origination fees may not be increased, regardless of changes in the market, bankers receiving more than the disclosed anticipated fees shall refund the difference to the borrower."

Things happen... if the client decided to float, how is that the lenders fault? Besides, respa states that if you change anything from the initial GFE, that a new one is suppose to go out in 3 days... the only problem with this and the initial GFE by respa, being in the borrowers hands in 3 days is a joke. There is no way of knowing if the client ever got one... except with their signature on it..... the signature and the date is what needs to be address.

7C..... the break even point. In some states, we have the NTB... the net tangible benefit.. Same thing... this should be a national thing, having everyone on the same page.

Bill... most of what you wrote... just words of wisdom from someone that has been around this business for a long time. Nice job...

Apr 15, 2008 06:57 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Bill.... lol That Jason is like a nat..... I am over here trying to make a living and he keeps commenting. It's funny... most of today, about 60% of my comments, Jason has a comment at least right ahead of me or two spots ahead of me... you would think that I was following him around all day.... lol semi sad...

Apr 15, 2008 07:00 AM

Pam Pugmire

Silvercreek Realty Group - Meridian, ID

Meridian Idaho Real Estate

I am glad to see that you acknowleged that the greater problems lie in the intermediate and lender levels. I don't think that these will take care of themselves, however. Look at the head guy at Countrywide that received a $20 Million bonus for signing on with B of A.

Apr 15, 2008 07:01 AM

William J. Archambault, Jr.

The Real Estate Investment Institute - Houston, TX

Jeff,

My proposal would freeze your fees, if the clients chose to let a loan "float" you fees wouldn't change. The client would get the benafit or loss from changing in the market.

We're totally agreed about forms needing signed for. Net tangible benefit is a great idea, I didn't say mine were original, only what I believe.

You're going to have to work harder to convince us your not following Jason. Some of us remember a photo of you two togeather.

Happy Birthday!

Bill

Apr 15, 2008 07:29 AM

William J. Archambault, Jr.

The Real Estate Investment Institute - Houston, TX

Pam,

The unterminated lenders that have gone out of business have been punished.

I don't have a solution to Motoazillo, Countrywide, and B of A, Birds of a Feather"" comes to mind.

Thanks for commenting.

Bill

Apr 15, 2008 07:34 AM

Jason Sardi

Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC

Your Agent for Life

After further review, I would really like to see these suggestions get some increased exposure and dialogue. Any chance of submitting this to a relevant association Bill?

Apr 15, 2008 07:38 AM

William J. Archambault, Jr.

The Real Estate Investment Institute - Houston, TX

Jason,

Included the source and submit where you will. I belive in what I write.

Bill

Apr 15, 2008 07:48 AM

Christopher Ohlsen

Credit Werx, LLC. - Malone, NY

I am also glad to see that you acknowledged the root of much of the problem. Here's the thing; The lenders are to blame for any mortgage crisis that we may be in! I have noticed in my own files that "transparency" is becoming more of a requirement which is fine with me. I already disclose everything that should be disclosed... of course the underwriting process is getting bogged down and becoming slower... Broker fee Acknowledgements, Affiliated business disclosures, good faith estimate of service providers... All before they will issue an approval. I think that many of the requirements are a bit lame but maybe that is because I am completely honest with my borrowers. Some of the requirements I think are just ridiculous but some of them I really think are a good idea. I like the idea of being on a level playing field and not competing against people who constantly low ball borrowers, get them to pay for an appraisal, then "customer set" the day (sometimes hours before) before closing. But still, like Jeff said up top; some things are outside of our control (my words)... It's not our fault if a borrower will not lock against our advice then he/she gets stuck with a higher rate because rates spiked and we had to lock because a dealine is coming up. I had one example recently where I could've given the guy a 5.25% and it was paying 1.25% on the back end... He would not lock against my advice. He kept saying that he believes that the rate will drop even further even though I told him based on the current economic data that it will not. We got to the closing and it was obvious that rates were going to continue their upward trend. He finally agreed to lock at a cost of .879% (buydown instead of me getting paid) at an interest rate of 5.375%. If he'd of locked I would've earned an honest commission and he'd of gotten a better rate. Since he would not listen to me I earned less per hour on that file than a McDonalds employee earns and he did not get as good of a rate.

Apr 17, 2008 07:37 AM

Lew Corcoran

Better Living Real Estate, LLC - East Bridgewater, MA

Real Estate Agent, Home Stager, & Photographer

1. Concur, but standards shall be standard nationwide as many lenders can do business in more than 1 state.
2. Concur.
3. Concur.
4. Concur.
5. Concur, but only if the same applies to real estate brokerages and builders. Otherwise, I'd have to disagree.
6A. Concur.
6B. Disagree. However, the lock period should be clearly shown.
6C. Disagree. Use 15 days for purchase, 30 days for refinance.
6D. Concur.
7A, B and C. You'll have to tackle the government on this one.
7D. Concur.
8. Concur.
9. Concur. And stop asking for race on the 1003s!
10. The states shall be encouraged to promote an "exclusive right to finance" contract between consumers and lenders. What's this?

May 01, 2008 09:37 AM