Senate Approves Amendment-Will It Shut Down Brokers?

The Senate Wednesday morning approved an amendment that sets minimum underwriting standards on single-family loans with a "safe harbor" that essentially limits the points and fees lenders can charge to 3% of the loan amount. The National Association of Mortgage Brokers said the provision would "shut down" the broker channel due to the 3% cap on points and fees. "This amendment will take mortgage brokers completely out of the competitive landscape," said NAMB's top lobbyist Roy DeLoach. The amendment sponsored by Democratic Senators Jeff Merkley (Ore.) and Amy Klobuchar (Minn.) requires lenders to verify a borrower's income and ability to repay the mortgage. As part of an anti-steering provision to prevent borrowers from being forced into higher cost (and riskier) loans, the amendment has a safe harbor provision allowing lenders and brokers to know when they are compliant. Lenders will know they are operating on "sound ground," when their fees do not exceed 3%, said Sen. Merkley. The Senate voted 63-36 to approve the Merkley/Klobuchar amendment, which was drafted to counter an amendment by Sen. Bob Corker, R-Tenn. The Corker amendment would have set minimum underwriting standards including a 5% downpayment requirement on most loans, including FHA-backed mortgages. The Corker amendment also would have stripped the 5% risk retention requirement from the Wall Street Reform bill. Corker's amendment was defeated in a 57-42 vote.