NAMB warns of unintended harm to borrowers in mortgage reform bill: Hails legislative call for national standards for all originatorsMortgagePress.comHR 3915, Mortgage Reform and Anti-Predatory Lending Act of 2007, YSP, Rep. Barney Frank
The National Association of
Mortgage Brokers has praised many of the consumer protection
provisions of the mortgage industry reform legislation introduced
by Representatives Frank, Miller and Watt, but again warned of the
potential unintended harm consumers will face if the Yield Spread
Premium (YSP) paid to Mortgage Brokers is eliminated as stated in
their co-sponsored bill, "The Mortgage Reform and Anti-Predatory
Lending Act of 2007."
With regard to the elimination of the YSP, NAMB President George
Hanzimanolis voiced serious concern about the legislators decision
to eliminate the originators ability to receive direct and indirect
compensation. The indirect compensation mortgage brokers receive
from lenders is a defendable fee that actually lowers closing costs
to consumers. It is an imperative tool for first time homebuyers,
and critical to enable so many people to own a home and manage
their finances. The NAMB President said he hoped to work closely
with legislators and consumer groups so that all parties understand
the important role YSP plays in securing a home loan.
TITLE 1 (Mortgage Origination)
The NAMB president went on to applaud language in the bill
mandating strict national standards for all loan originators,
regardless of where they work within the mortgage industry. The
bill would require criminal background checks, testing to
demonstrate basic knowledge of loan products and continuing
education and professional ethics training for all who originate
These provisions represent a huge victory for consumers and for
NAMB, which has fought for years to make it easier for consumers to
compare loan products offered in the different mortgage sources,
such as banks, lenders, and mortgage brokers, Hanzimanolis said.
The mortgage industry has changed dramatically in recent years, but
the laws and regulations designed to protect consumers have lagged
behind. These reforms will help modernize the regulatory system and
drive bad actors from our industry.
NAMB commended language that would require loan originators to
provide a simple, straight-forward disclosure of their role in the
mortgage transaction, including all fees and other sources of
compensation, and to do so at the onset of the process. Such
disclosures will eliminate confusion on the part of the borrower,
and even strengthen the borrowers bargaining position when shopping
for a mortgage, Hanzimanolis said. It will also help expose
activities of unscrupulous originators who try to shield themselves
from detection by keeping consumers uninformed.
NAMB also endorsed the bills establishment of a national
registry if it is governed by a federal agency such as the Federal
Trade Commission, it includes every individual mortgage originator
(including loan officers working for federal- and state-chartered
banks and lenders, credit unions and mortgage brokers), and every
individual pays a registry fee to cover operational costs of the
registry and to create funds for enforcement and consumer financial
literacy education programs.
Hanzimanolis praised the bills sponsors for applying new
mandates even-handedly across the board to all originators. The
all-originator approach this bill envisions will be good for
consumers and good for the mortgage industry, he said.
TITLE II (Minimum Standards for ALL
Although full review of the bill is currently underway, NAMB
expressed concern about putting into legislation the strict
underwriting standards included in Title II.
We need to have confidence in the markets ability to correct
itself, Hanzimanolis said. Further restrictions through legislation
will cripple the industry, and will adversely affect the very
people were trying to help.
One measure NAMB strongly supports is the elimination of special
incentives paid by lenders to mortgage originators who sell
particular loan products. The function of the mortgage originator
is to provide the consumer with choices. Since some programs are
more profitable for lenders, we see lenders offer originators
incentives for steering a consumer to a particular program. As
brokers, NAMB members see this as a disservice to the consumer, and
therefore believes the practice should be prohibited.
TITLE III (High-Cost Mortgages)
NAMB opposes a provision to reduce the points and fees trigger for
high-cost loans under the Home Ownership and Equity Protection Act
(HOEPA) from eight percent to five percent, and include all costs
and fees charged to the borrower. Hanzimanolis said NAMB is
concerned many lenders will decide not to make loans that cross the
proposed HOEPA threshold, which would make many consumers
vulnerable as interest rates rise.
Hanzimanolis likened this provision to government sanctioned
red-lining. These restrictions are going to cut off credit to
people who are generally in lower economic areas who deserve and
need credit, he concluded.
For NAMB's full testimony presented on Oct. 24, 2007 by NAMB
President-Elect Marc Savitt before the House Financial Services
Committee regarding HR 3915, "The Mortgage Reform and
Anti-Predatory Lending Act of 2007," please click
For a link to a summary of HR 3915, "The Mortgage Reform and
Anti-Predatory Lending Act of 2007," click
For the full text of HR 3915, "The Mortgage Reform and
Anti-Predatory Lending Act of 2007," click
For updates concerning HR 3915, visit www.namb.org.