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LO Comp Bill a Subprime Effort?

MAY 17, 2013 5:00pm ET
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WE’RE HEARING that it is going to take a concerted industry effort to get a legislative fix for the QM rule on loan officer compensation.

And consumer groups are already united in their opposition to a bill—even though it is called the Consumer Mortgage Choice Act.

The approach taken in this bill is a “flashback to the recent subprime crisis,” according to a joint letter to Congress signed by 19 consumer, civil rights and community groups.

The main thrust of the industry bill is to exclude certain fees and compensation from being counted toward the 3% points and fees cap in the qualified mortgage rule.

The House bill (H.R. 1077), which has 24 co-sponsors, would exclude compensation paid by a lender to a mortgage brokerage firm. It also would exclude fees paid to an affiliated title company from the 3% cap.

Industry groups have taken the legislative route because they believe the Consumer Financial Protection Bureau has gone about as far it can go in trying to accommodate their concerns. And despite the difficult odds, it will take congressional action to get a workable QM rule.

Meanwhile, consumer groups contend the Consumer Mortgage Choice Act will only lead to inflated origination costs and undermine the Dodd-Frank reforms.

“By creating broad exceptions from the 3% points and fees threshold for QM loans, this bill would create a new kind of incentive for future abusive lending that overcharges consumers,” according to Americans for Financial Reform.

There is little room for compromise at this point. And one side is going to get burned when the CFPB puts the final touches on the QM rule. The bureau is reworking some parts of the QM rule. And it is expected to issue some changes in June. At that point, the fight will move to the halls of Congress.

I SPY: The news that the government has been spying on news media has caused commotion not just in the media. (Seriously, we are all outraged by this. As long as we’re firing IRS executives and State Department Joes, let’s clean house in this area a little as well.) The excitement, though, has reached all the way down to our Grapeviners, who are wondering if Uncle Sam has ever spied on the Vine and its multitude of information, gossip, political speculations and cracker-barrel philosophizing. One Viner says the government has spied on the Vine for years to get data on originations and the opinions of originators. Others take a less serious view of the situation. What do you think? Do the guys that run the black helicopters have a listening post set up close to the Grapevine? Or is it paranoia and aggrandizement? Add your voice at mortgagegrapevine.com.

BESTBLOG: We liked John McDermott’s “Location, Location” blog this week, which examined the risky turf of local versus nonlocal appraisals. Seems Realtors and lenders in John’s neck of the woods (Michigan) don’t like strangers from faraway appraising properties in their towns. Sales get tossed when the appraisals come in too low. At the same time, Dodd-Frank rules that aim to cut down too-high appraisals need to be followed. John, who is a closing attorney, prefers local appraisers when he has a deal going, but sympathizes that an appraiser’s lot is not a happy one. (Who would like to be called “geographically incompetent?”)

MOST READ/EMAILED: The most read content on our site this week was Bloomberg’s report that the mortgage settlement checks are in the mail. It really is all about the money, isn’t it? Our most emailed content is also about the do-re-mi, Brian Browdie’s report on the Wells/QBE force-placed insurance settlement. The two will pay $19 million to settle this one. We’ll let you know when the checks go out!

SNEAK PEAK: Here’s an advance look at the lead story in Monday’s print edition of NMN: David Stevens, MBA CEO, says there’s a window of opportunity to combine the securities of Fannie Mae and Freddie Mac, an idea that’s been percolating out there slowly for at least a year. That time is now, while rates are still low and liquidity eased, Stevens opines. And the benefit to the taxpayer would be considerable, he says.

Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.

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