Below is my Comment to Federal Reserve Board on R-1366. Fellow Active Rainers, both mortgage industry members and related real estate industry members, this is ALL of our battle that needs to be fought here. Right now 99% of my business consists of purchase transactions, and a large percentage of those are first time home buyers. How many of YOUR transactions will be affected if your buyers must either agree to pay points to get their loan OR get in line at the national bank for their loan? Many buyers do not fully grasp what the removal of yield spread premium pricing options will mean to them. How many of your buyers - first time or otherwise! - would not be able to come up with an extra 1% to bring in at closing? This is in addition to larger down payment requirements they already face. What happens when the tide turns in this real estate market and Sellers are no longer agreeing to contribute toward YOUR buyers' closing costs? How many of YOUR transactions could be affected by this? Please go to the Federal Reserve Board's comment section and have your say on this matter:
http://www.federalreserve.gov/generalinfo/foia/usr_agrmt.cfm?url=ElectronicCommentForm.cfm?doc_id=R-1366%26doc_ver=1%26name=Regulation%20Z%20-%20Truth%20in%20Lending%20-%20Closed-end%20Mortgages%26date=20090723a
Comment I posted to Federal Reserve Board on R-1366 9/30/09:
Is it steering if almost ½ of today’s conventional buyers are choosing yield spread premium pricing as the option that suits their needs best? (See below excerpt from Federal Housing Finance Agency’s 9/29/09 Mortgage Interest Rates Report) If we add the FHA, VA, USDA home buyers/owners in to this calculation, will this percentage increase? I suspect it will.
Many of the buyers I work with right now are first time home buyers. Usually, they are receiving a credit from the seller or down payment assistance that helps them with their closing costs, so they choose the lowest interest rate they can afford with this assistance. Some buyers, though, know that the home they are purchasing now is going to be sold to launch them in to their long term family home. Same goes for some Investor purchases. Many first time homebuyers and investors are buying a short sale or foreclosure home they believe will give them equity to launch them to that long term plan relatively quickly. They don’t want to have to pay points to get their home loan – they want the lowest overall cost to accommodate their short term plan – which they will get by choosing a slightly higher interest rate to avoid paying points.
Why is it being proposed that this tool be taken away from a growing percentage of home buyers? What is it you are trying to “fix”? I realize not everyone discloses the way I always have, putting on the buyers/homeowners’ Good Faith Estimate exactly what points are being charged AND how much the yield spread premium will be paid by the bank/mortgage company for the interest rate the buyers/homeowners have chosen – have CHOSEN, because they were informed what pricing alternatives were available to them. This is more than what banks are required to disclose, so why would the regulations be changed to accommodate less disclosure by the banks? We’ve been sailing some rough seas in the mortgage industry, and R-1366 just doesn’t make sense to me.
Something smells a little fishy here. This does not look like a regulation designed to help the consumers…it looks like it is a regulation that is designed to help the big banks. If this regulation is passed, like many of the other recent regulations and bills that have been approved and put in to affect, it is going to HARM the consumer. If it is the mortgage industry – which should include real estate lending Big Banks – you are trying to force to disclose information to the consumer properly, how about start with requiring banks to disclose like any other entity? How about enforcing EXISTING regulation? I believe you are barking up the wrong tree here, and need to re-direct your focus before the percentage of home ownership in the U.S. plummets and the foreclosure rate increases any further.
Based on the comments that have been coming in on an article I posted on my blog at Active Rain, the consensus is R-1366 is the wrong approach. http://activerain.com/blogsview/1261406/steering-is-it-steering-if-almost-the-buyers-choose-this-option-
For Immediate Release Contact: Corinne Russell (202) 414-6921
September 29, 2009 Stefanie Mullin (202) 414-6376
Federal Housing Finance Agency Reports Mortgage Interest
Rates Washington, DC – The Federal Housing Finance Agency today reported that the average interest rate on conventional 30-year, fixed-rate, mortgage loans of $417,000 or less decreased 1 basis point to 5.30 percent in August. The average interest rate on 15-year, fixed-rate loans of $417,000 or less increased 3 basis points to 4.92 percent in August. These rates are calculated from the FHFA’s Monthly Interest Rate Survey (MIRS) of purchase- money mortgages. These results reflect loans closed during the August 25-31 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-July.
The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was 5.23 percent in August, down 2 basis points from 5.25 percent in July. The effective interest rate, which reflects the amortization of initial fees and charges, was 5.33 percent in August, down 2 basis points from 5.35 percent in July.
This report contains no data on adjustable-rate mortgages due to insufficient sample size.
Initial fees and charges were 0.67 percent of the loan balance in August, unchanged from July. Forty-four percent of the purchase-money mortgage loans originated in August were ";no-point"; mortgages, up from 42 percent in July. The average term was 28.1 years in August, down 0.3 years from 28.4 years in July. The average loan-to-price ratio in August was 74.6 percent, down from 74.9 percent in July. The average loan amount decreased by $5,500 to $221,800 in August.
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