NAMB Capitol CommentMortgagePress.comHOEPA, VA, FHA, mortgage reformReform Hot Topic of 1999 Conference
NAMB's effort to enact fundamental mortgage reform highlighted its annual Legislative
Conference held in Washington D.C., April 17-20. More than 200 industry leaders from across
the country attended the conference which featured key members of Congress, regulators, and
congressional staff. Attendees received updates on several issues, including mortgage reform and
HUD's recent YSP Statement of Policy. A variety of speakers from both HUD and Congress
addressed the group, including HUD Deputy Secretary Saul Ramirez, HUD General Counsel
Gail Laster, Senator Wayne Allard (R-CO), Representative Cal Dooley (D-CA), and
Representative Bob Ney (R-OH). NAMB members took the pro-broker message to Capitol Hill,
visiting nearly 200 Congressional offices, educating legislators on the role of Mortgage Brokers
and stressing the need for mortgage reform legislation. The advocacy work continued with
NAMB members meeting with officials from the FHA and, for the first time, hosting a VA
Industry Roundtable designed to bring together mortgage industry participants and their VA
counterparts. The all-day event was attended by representatives from NAMB, MBA, and other
trade groups, as well as Freddie Mac and Fannie Mae. The Roundtable session focused on a
variety of topics, and provided brokers with a valuable opportunity to offer suggestions to the
program's future.
White House Unveils Consumer Protection Initiatives
In a recent White House briefing, President Clinton unveiled a series of consumer protection
proposals intended to safeguard consumer privacy and provide protection against abusive
financial practices. While most of President Clinton's initiatives are focused on protecting
financial information and preventing credit card abuse, several focus on mortgage lending.
In the report, the Administration endorses the joint HUD/FED recommendations on mortgage
reform and encourages originators to provide reliable rate, fee, and closing cost information early
in the process. The White House also suggested additional disclosures for high LTV mortgages.
Other proposals offered by the President would increase civil liability limits for TILA violations
and would target "abusive practices" regarding HOEPA loans. The report also suggests
regulating the financing of fees in HOEPA loans, restricting prepayment penalties and balloon
payments, and lowering the threshold for the triggering of HOEPA. Although the President
called upon Congress to implement his initiatives, he did not indicate immediate plans to send
legislation to the Hill. NAMB will continue to monitor the status of these proposals, and will
pass along additional information should any of the initiatives be introduced in Congress.
HUD Withdraws Proposed Interim Rule
HUD officially withdrew its interim rule proposing that FHA insurance on new homes be able to
exceed 90% loan-to-value ratio if the residence is covered by a qualified one-year builder
warranty. Representative Rick Lazio (R-NY), Chairman of the House Banking Subcommittee on
Housing and Community Opportunity, and Representative Joe LaFalce (R-NY), ranking member
of the House Banking Committee, sent a letter to HUD Secretary Andrew Cuomo requesting that
HUD retract its interim rule and re-issue its proposed rule. In their letter to HUD, the
Representatives questioned the wisdom of eliminating inspection and warranty standards for new
homes purchased with FHA-insured loans. "We understand that, in the past, these standards have
provided important consumer protections against structural defects in new homes and have
served to minimize financial liabilities to the federal government," the legislators wrote. HUD
plans to re-issue the warranty regulation as a proposed rule following a 60-day comment period.
VA Issues Rule Modifying Refinance Requirements
Under a final regulation that went into effect May 24, the Department of Veteran's Affairs (VA)
will not permit refinancing if the existing VA loan is delinquent or the monthly loan payment is
not reduced. The rule also bars refinancing for a delinquent home mortgage and requires veterans
seeking refinancing loans to meet certain standards. This is consistent with current authority
allowing veterans to refinance outstanding VA-guaranteed loans with a new mortgage at a lower
interest rate. The purpose of this interest-rate reduction rule is to prevent lenders from packing
refinanced VA loans with excessive fees so that the monthly payment goes up, even though the
borrower receives a lower interest rate. To receive a copy of the final rule, E-mail
[email protected] and write "VA Final Rule" in the subject line.
