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Letter to the editor: Sub-prime truths

National Mortgage Professional
Aug 14, 2007

Dinham testifies before Subcommittee on Financial InstitutionsMortgagePress.comHarry Dinham,NAMB National Association of Mortgage Brokers President Harry Dinham, CMC testified that Congress could go a long way to help consumers, particularly sub-prime borrowers, now and in the future by making Federal Housing Administration (FHA) loans a real and viable alternative in the sub-prime market. He urged Congress not to fund or support a proposed broker registration system because it is too narrowly focused to protect consumers from predatory lending. Dinham spoke before the U.S. House Subcommittee on Financial Institutions and Consumer Credit at a hearing to examine ongoing challenges in the sub-prime mortgage market. He urged Congress to increase the number of origination sources responsible for delivering FHA loans to consumers, pointing out that brokers are discouraged from participating in the FHA program by the unnecessary and burdensome financial requirements. NAMB predicts the removal of such financial barriers would increase mortgage broker participation in the FHA program from roughly 18 to 85 percent, and would thereby increase FHA's loan origination volume and market share by nearly 40 percent. "For sub-prime borrowers who are facing foreclosure, industry and policymakers must partner to help provide options so that as many as possible are able to remain in their home," said John M. Robbins, CMC, chairman of the Mortgage Bankers Association. In Dinham's testimony, he also cited the need to redefine who is operating as a mortgage broker and improve professional standards for all mortgage originators. "Consumers are often unable to distinguish one origination source from another," Dinham said, "and as the industry has evolved with the advent of the mortgage securitized market, there is no clear delineation between distribution channels. Today, a mortgage broker should include anyone that originates a loan with the intent or practice of delivering, distributing or selling it, servicing released, within 120 days." NAMB believes education standards and criminal background checks for all mortgage originators will be effective measures in successfully combating abusive lending tactics and reducing the number of foreclosures in America. Dinham also took the opportunity to criticize the mortgage broker registry proposed by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) because it is limited only to mortgage brokers. He said that the regulators' continued rhetoric is hollow and misleading to the public. Following his testimony, Dinham said, "At hearing after hearing, these groups extol the benefits of this new registry. However, they do not let legislators know that thousands of loan originators at banks and other lending institutions will be exempted from the registry and left unaccountable to the consumers they serve." He continued, "We urge Congress to refrain from offering any assistance until all mortgage originators are registered in the system." The two state regulatory associations have said the registry would help fight mortgage fraud and predatory lending. Dinham said the goals are admirable, but the regulators don't seem willing to approach the registry with a realistic vision that all loan originators must be included for it to be effective and protect consumers. "Consumers would get a false sense of security from this system as it stands today. Most consumers do not distinguish between origination channels, and they would naturally assume that a loan originator at a bank would be held to the same high standards. This is far from the truth, and bad actors at banks would still be able to freely travel from bank to bank, even if convicted of fraud," Dinham said. Dinham noted that the largest and most recent predatory lending settlements have involved bankers and lenders that would not be included in the proposed national registry. "We support stronger education requirements for the industry, and criminal background checks for all originators," said Dinham. "This registry falls short of accomplishing these goals." In its written testimony, NAMB urged Congress to request the General Accounting Office conduct a broad, long-range study into the true causal effects of the rising foreclosures and restated support for RESPA reform. "What I have seen of late troubles me deeply," said Robbins. "Responsible lenders only extend credit to borrowers who are willing and able to make mortgage payments. They do no trick borrowers into loans that are unsustainable. And they do not hold out something that is only a mirage of the American dream. Yet bad loans were made. They were not made responsibly or with the best interest of consumers in mind." For more information or to read Dinham's complete testimony, visit
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