Compliance & Regulation

The president-elect of the National Association of Mortgage Brokers says the Department of Housing and Urban Development does "not care about true simplification" of the Real Estate Settlement Procedures Act, and he vowed to vehemently oppose HUD's latest RESPA proposal.The proposal, which had not yet been released officially, includes a four-page good-faith estimate instead of a one-page GFE favored by the NAMB, Marc Savitt told attendees at the Southeast Mortgage Brokers Conference (sponsored by the Georgia Association of Mortgage Brokers) in Savannah, Ga. Mr. Savitt charged that HUD had bowed to pressure from other industry participants, contending that the RESPA proposal is about market share, not simplification. He said the new rule is similar to one HUD proposed back in 2004 but with the packaging provisions removed. Mr. Savitt vowed that the NAMB would "hit them with everything we have." In response to the 2004 rule, a grassroots campaign resulted in 45,000 letters of protest. "That is nothing compared with this time," he predicted. He called on mortgage brokers to contact their customers and have them write letters to HUD. Mr. Savitt told the conferees that the NAMB has attorneys in place ready to file a lawsuit against HUD as soon as the rule is formally published. The association can be found on the Web at http://www.namb.org.

"The fraudsters are the vampires" many homeowners have to fear because they "suck the blood from our communities," says Alicia Shepard, founder of the Georgia Real Estate Fraud Prevention and Awareness Coalition.Speaking in Savannah, Ga., at the Southeast Mortgage Brokers Conference sponsored by the Georgia Association of Mortgage Brokers, Ms. Shepard said legal efforts to prosecute those who commit fraud have had mixed results. In her former neighborhood of Moorings IV in the Atlanta area, while there have been some arrests and convictions, the overall lack of successful prosecutions has destroyed neighborhood morale and unity, she said. Gwinett County authorities told Ms. Shepard and her family that the county could not protect them anymore, and she recounted incidents of abuse to her pets and property. As a result, her family had to leave what she termed their "dream home." Ms. Shepard said even upscale communities in the area, such as Wolf's Creek, while successful in many efforts to combat mortgage fraud, still have scars.

The number of vacant single-family homes for sale rose 1.8% in the third quarter, according to a government report, signaling that inventory buildup has at least stabilized for now.The Census Bureau reported that vacant homes for sale rose from 2.04 million in the second quarter to 2.07 million in the third quarter. Earlier this year, economists at the National Association of Home Builders were alarmed that the number of vacant homes on the market jumped to 2.18 million in the first quarter, up nearly 600,000 units in one year. This jump indicated not only deteriorating market conditions, but the dumping of properties by investors and speculators -- making it more difficult for builders to address their inventory problems. NAHB chief economist David Seiders said the inventory overhang is still quite heavy. "There has been some improvement, but the big run-up is still with us," he added. The Census Bureau report also shows that the homeownership rate was unchanged at 68.2% in the third quarter, although down from 69.0% a year earlier. Meanwhile, the homeownership rate for blacks rose to 46.7% in the third quarter from 46.3% in the second quarter, while the homeownership rate for Hispanics edged up slightly to 50.1%.

Two million households with adjustable-rate subprime mortgages could end up in foreclosure by the end of 2009 and lose $71 billion of their housing wealth, according to a Joint Economic Committee report that breaks down the impact of foreclosures on each state."The Bush administration needs to take off its ideological handcuffs and act quickly to save financially strapped families from drowning in a tidal wave of subprime foreclosures," JEC Chairman Charles E. Schumer, D-N.Y., said in releasing the report. The report estimates foreclosure losses by state, including projections that neighboring homeowners will see the value of their homes decline by $32 billion. The congressional report covers subprime foreclosures from the beginning of 2007 to the end of 2009 and assumes that house prices will decline sharply. The Bush administration estimates that foreclosures will not exceed 500,000, Sen. Schumer said, adding, "That is much too low."

Former Housing and Urban Development Secretary Henry Cisneros has resigned from the board of Countrywide Financial Corp., Calabasas, Calif., to spend more time managing CityView, a company that lends money to urban homebuilders.According to a public filing, Mr. Cisneros' resignation letter is dated Oct. 18, but Countrywide did not issue a news release on his departure until Oct. 24. A HUD secretary during the Clinton administration, he joined Countrywide's board in 2001. In his letter of resignation he notes his "immense admiration" for Countrywide as a company. Countrywide can be found on the Web at http://www.countrywide.com.

The safe-harbor provisions to protect securitizers from liability in a House predatory-lending bill would create "more stringent" underwriting standards for subprime mortgages than banking regulators currently require, according to the comptroller of the currency.Comptroller John Dugan told a House panel that the bill (H.R. 3915) establishes "brighter and stricter" rules for subprime lending than the federal regulators have issued for banks and would restrict the supply of subprime credit. To qualify for the safe harbor, subprime loans must meet an ability-to-repay standard, income must be documented, debt-to-income ratios cannot exceed 50%, and the loan must be underwritten to the fully indexed rate, including insurance and taxes. The Mortgage Bankers Association is urging House Financial Services Committee Chairman Barney Frank, D-Mass., to provide more flexibility. "We strongly recommend that Congress carefully consider the potential impact of these safe harbors before hard-wiring them into the law," MBA senior vice president Kurt Pfotenhauer testified.

The Department of Housing and Urban Development is preparing to issue an "alert" soon that warns Federal Housing Administration lenders about paying "excessive" fees to non-FHA-approved mortgage brokers."We are concerned [that] consumers are being charged excessive fees," a HUD spokesman said. He said HUD is planning to warn FHA lenders soon that these fees could be "duplicative." While non-approved brokers can refer clients to FHA lenders, they are not allowed to take FHA applications or originate FHA loans. Nevertheless, FHA lenders are soliciting non-approved brokers to bring them customers and loans to process. HUD investigators have found that some lenders are charging borrowers points and paying $4,000 to $5,000 to the brokers. The National Association of Mortgage Brokers said it condemns this practice, which circumvents the FHA's approval process for originators. "This loophole needs to be closed as part of FHA reform" legislation, NAMB president George Hanzimanolis said.

The Department of Housing and Urban Development has given the green light to the recent request by AmeriDream Inc., Gaithersburg, Md., to prolong its ability to provide downpayment assistance until Feb. 29, 2008."We are pleased to reach an amicable agreement with HUD in our common mission to serve low- and moderate-income homebuyers," said AmeriDream president Ann Ashburn. The new deadline does not include other DPA providers, who are required under a HUD rule to stop their seller-funded DPA operations by Oct. 31. "HUD will recognize all applications that have a signed sales contract prior to the effective date, according to its congressional testimony," the DPA reported. Moreover, the affordable housing nonprofit said, "This agreement will facilitate litigation on an orderly schedule and provide the court with ample time to consider the merits of this important dispute." AmeriDream can be found online at http://www.ameridream.org.

The National Association of Mortgage Brokers is hoping to find some middle ground with House Democrats on a provision in a newly introduced predatory-lending bill that would ban "incentive" payments to originators, including yield-spread premiums that are a broker's main source of compensation."I understand their intent is aimed at incentive payments," NAMB executive vice president Roy DeLoach said, where a securitizer pays an additional premium for certain types of loans. The NAMB agrees that incentive payments should be banned. "We want to clarify that an origination fee can be paid by the lender to the brokers," Mr. DeLoach said. Otherwise, the mortgage brokers will be forced to oppose the bill introduced on Oct. 22 by Reps. Barney Frank, D-Mass., Brad Miller, D-N.C., and Mel Watt, D-N.C. "The indirect compensation mortgage brokers receive from lenders is a defendable fee that actually lowers closing costs to consumers," NAMB president George Hanzimanolis said. The NAMB can be found on the Web at http://www.namb.org.

Lack of income documentation on securitized subprime mortgages would allow borrowers to rescind the loan and recover transaction costs under a predatory-lending bill introduced by House Democrats that comes down hard on stated-income loans.The bill, co-sponsored by North Carolina Congressmen Brad Miller and Mel Watt, creates a minimum national standard for mortgage originations that applies to all lenders and mortgage brokers. Securitizers would be required to conduct due diligence and sampling to detect possible lending violations. The bill also creates a safe-harbor provision and allows securitizers 90 days to cure a mortgage to avoid penalties. To qualify for the safe harbor, the loans must meet four basic standards -- ability to repay, income documentation, a debt-to-income ratio not exceeding 50%, and disclosure of costs for insurance and taxes. House Financial Services Committee Chairman Barney Frank, D-Mass, stressed that the assignee liability provision only applies to securitizers, not investors. Democrats plan to mark up the bill in the next few weeks. "The securitizers don't have to guess what kinds of loans" would get them into trouble, Rep. Frank told reporters. "It is well spelled out in the bill."