Mortgage Industry Participants – this is a Call To Action!:
(I know this is wordy, but there is no other way)
Oregon Senate Bill 965 hasn’t gone away. We, as Oregonians first and mortgage professionals second, are going to need your help THIS THURSDAY, and the help of everyone you know within your company and in the industry, to create a firestorm of concern and attention directed towards SB 965.
We essentially have only 24 hours to make our presence felt before the bill’s first committee hearing in the House, but it can be done. The bill is being heard by the Consumer Protection Committee in the Oregon House this Friday at 1:00 PM at a public hearing in Salem. Read the entire e-mail so that you will know what is coming to you on Thursday and what we need everyone to do tomorrow.
What was a bill that was originally intended to address only high cost loans and then also adjustable rate mortgages has now morphed into a bill that seems to be worsening by the day. Today, in its present amended version, it has the potential to realistically impose regulatory requirements and restrictions on approximately 75% or more of all mortgage loans originated and closed by Oregon regulated lenders. Worse, the Department of Consumer and Business Services and the Governor fully support the bill at this time. They are well intentioned, but not well informed.
Such a large number of loans would be affected because of the following:
-Interest-Only mortgage products are determined to be ‘non-traditional’
-Payment option mortgage products are determined to be ‘non-traditional’
-The state has the ability to consider loans that have any of the following characteristics as ‘non-traditional’
-Loans with Neg-Am options
-Short-term introductory interest rate options
-Reduced documentation
In other words, the following loan products would or could be covered by the definition of ‘non-traditional’, and therefore subject to the legislation:
Any version of reduced documentation loans, so SIVA, SISA, NINA, etc. - but also Agency product that called for anything less than a traditional full doc (i.e. paystubs, w-2’s, tax returns, 2 months bank statements, VOD’s, VOE’s, etc.)
-HELOCS
-Construction Loans
-Intermediate ARMs
-Any loan, including fixed rate loans, with I/O options
-In other words, a very large amount of product
The Bad about SB 965:
It is applicable to all state licensed “Lenders” – this is essentially all lenders that are not national banks or subsidiaries of national banks
HOWEVER – it would also appear that as of today the state may have now included brokers into the scope of coverage
Again, it does not apply to national banks or the subsidiaries of national banks due to federal pre-emption – but the catch is that there are some clauses just might apply, meaning now the banks are concerned too
It requires that all regulated lenders “ensure” that the loan products being offered to consumers are done so in an “affordable” manner – in other words, we have to guarantee that the consumers can pay for this mortgage over time
We have to qualify the consumers at the fully-indexed, post I/O period amortization
A 3/1 ARM would have to be qualified as a fully indexed ARM at a 27 year amortization, a 30 year fixed with a 10 year I/O would need to be considered as a 20 year fixed for qualification, etc.
Credit scores cannot be used as a “substitute” for documenting income and assets – read “full doc”
NO AUS takes these general factors into consideration, meaning that interpretation would have to be made by the lender in question, and then potentially the mortgage brokerage as well if brokers are included as well, putting into question the ability to lend “fairly”, as Fair Lending Laws require
There are PERSONAL LIABILITY provisions in the bill. They state that anyone that “aids and abets” in the closing of a non-traditional mortgage that later experiences a loss and that has any defect relating to the repayment capacity of the borrower, etc. is subject to financial penalties (including those related to the actual loss – i.e. the lenders loss as well as the borrowers loss in addition to a state fine. The penalty applies to the originating lender AS WELL AS any person involved in the loan file’s origination (again, ANY person)
It is very likely that many mortgage lenders, whether licensed or operating under national banks, whether retail, wholesale or correspondent will have cause to pull out of the Oregon marketplace in part or entirely due to the restrictions of trade that this bill imposes and the subsequent loss of revenue to cover operating expenses – in addition to the liability provisions
Housing values would suffer due to the loss of lenders and product to help buyers buy properties – this affects all homeowners and would slow down all real estate related activity!
Smaller, underserved marketplaces would lose the ability to have competitive offerings of product and pricing, which would spill into the larger Oregon markets
The list goes on
What we going to ask you to do about it. The following will take place tomorrow and Friday:
An e-mail from the OAMP will be issued around the noon-hour identifying action that is requested of you. We will ask that you forward it to EVERYONE in the business (lenders, originators, Real Estate Brokers, title companies, appraisers, etc.) as it will direct you and them to contact everyone’s own state representatives and senators so that our concerns can be known
The media are going to be contacted – and if you know of anyone, please contact them as well on your own
All of us will be communicating our concerns to our senators and representatives – bullet pointed talking points will be contained within that OAMP e-mail that is to go to your respective teams as well as anyone you know in the business
This is not just an OAMP thing – this is an entire mortgage industry thing, including the likes of the Oregon Bankers Association, Oregon Credit Union Association, Oregon Mortgage Lender Association, among others
On Friday, there is a Consumer Protection Committee Hearing at 1:00 PM in Salem – we hope that by that time many of our Oregon senators and representatives will be well aware of everyone’s concern over this bill and that they will be prepped for our collective opposition to this bill during the hearing
Thank you all for taking action to put a stop to Oregon Senate Bill 965!
Eric Wiley
Senior Vice President/COO
Pacific Residential Mortgage, LLC
2 CenterPointe Drive, STE 500
Lake Oswego, OR 97035
503.619.0483 (direct line)
F 503.670.0674
www.pacresmortgage.com
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