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National Mortgage Professional
Nov 19, 2007

NAMB urges House Financial Services Committee to hold the line on all-originator standardsMortgagePress.comMortgage originator standards legislation The House Financial Services Committee Chairman Barney Frank, along with Reps. Brad Miller and Mel Watt, introduced the Mortgage Reform and Anti-Predatory Lending Act of 2007. If enacted, the bill would call for licensing and registration of mortgage originators, regardless of where they work, in addition to criminal background checks, testing and continuing education. The bill also prohibits steering, establishes a federal duty of care, creates an ability to repay standard and imposes limited liability to secondary market securitizers. National Association of Mortgage Brokers President-Elect Marc Savitt made the case for uniform standards for all originators in testimony before the House Financial Services Committee on Mortgage Reform. In his testimony, Savitt warned the committee not to allow other industry players to carve out exemptions, saying that "creating a national standard that does not include all mortgage originators is a disservice to brokers and the public at large, because it allows bad actors to keep originating loans." Savitt's testimony is printed below. "Good afternoon Chairman Frank, Ranking Member Bachus and members of the Committee. I am Marc Savitt, president-elect of the National Association of Mortgage Brokers. Thank you for the opportunity to testify. "Like most of my fellow NAMB members, I am a small-business owner living in the same community where I work. The mortgage landscape is much different than when I first started in this business more than 25 years ago. Today, we have a 'deconstructed market.' Origination, funding, selling, servicing and securitizing can occur separately, or all can fall under one entity, or be connected through affiliated business arrangements. "This is why we are especially pleased by the all-originator approach taken by Chairman Frank and Reps. Miller and Watt in HR 3915, and Ranking Member Bachus in HR 3012. We commend this committee's leadership on realizing that consumer protections should relate to function rather than entity structure. "All consumers deserve the same level of information and protection regardless of where they go for their home loan. For over five years, NAMB has been pushing to raise the bar for entry to the mortgage profession by establishing uniform, minimum standards for education, testing and criminal background checks, and by urging creation of a national registry for all mortgage originators. "There are some that will push for carve outs, but doing so will dilute consumer protection and deny the market reality that all mortgage originators perform essentially the same function. We sincerely hope that this committee holds steadfast to the all-originator construct it has advanced in HR 3915. "Our greatest concern with HR 3915, however, lies with the practical implications and unintended consequences of the anti-steering provision. We support disconnecting compensation from the origination of loan products or programs. But we are concerned that current language could be interpreted as banning indirect compensation for brokers. Such a measure would destroy small-business brokers in this country and hurt the consumers they serve. "As the only origination channel that makes full disclosure of their yield-spread premium on both the good-faith estimate and again at closing, our indirect compensation has come under intense scrutiny. Meanwhile, our originator competitors earn the same type of indirect compensation without disclosure and seemingly without criticism. We should not preserve the disclosure inequity created by the U.S. Department of Housing and Urban Development's 1992 ruling. It confuses consumers and hurts the natural order of competition. "We do not believe it is the committee's intent to legislatively pick winners or losers or further disadvantage small business in the mortgage industry. We look forward to continuing to work closely with the committee to clarify the intent and impact of this provision. "We thank Chairman Frank and Ranking Member Bachus for requesting a Government Accountability Office study on the causes of foreclosures. This recently released report confirmed that the problems in the mortgage market today cannot be traced to a single source. Everyone participated and no one single participant is to blame. "We also have grave concerns on Title III of HR 3915. The language essentially prevents all but the perfect borrower from being able to obtain affordable financing. We find this unfortunate, as a key objective of many fair lending laws is to expand access to homeownership for low- to moderate-income and minority homeowners. The supply of funds is now very tight. A de facto federal usury ceiling will tighten the market even further, denying funding to underserved markets. Tempered responses and proposals are critical in a market that is already prone to over-reaction. "Although not specifically addressed in HR 3915, we commend Reps. Kanjorski, Chairman Frank and others for proposing the Escrow, Appraisal and Mortgage Servicing Improvements Act. NAMB supports the efforts in this bill. "In crafting proposals, we must remember that the mortgage industry is a business and that the market participants compete. NAMB looks forward to continuing to work with this committee as well as respective regulators on accomplishing solutions that are effective in helping consumers without hurting small business. "Thank you, and I am happy to answer any questions that you might have." Bachus opened the hearing with a few positive notes concerning sub-prime mortgage lending. "Let us not forget that sub-prime lending has made it possible for millions of low- to middle-income families to purchase homes," said Bachus. "Even after the events of the past few months, some 85 percent of sub-prime borrowers continue to make timely payments and are enjoying the significant benefits of homeownership." Bachus believes that keeping this in mind is very important while working together to build the best possible legislation. While the Mortgage Bankers Association does not support HR 3915, MBA Senior Vice President Kurt Pfotenhauer offers advice and help to make it a better bill. Pfotenhauer said, "... if HR 3915 becomes law, some people will be locked out of the mortgage market, many of whom would have been successful homeowners. Lowering the HOEPA triggers, establishing the ability to repay and net tangible benefits tests, and eliminating some products from the market will have this effect." FDIC Chair Sheila Blair voiced her opinion on the bill as well. She feels that "the core of the problem lies with lax lending standards and inadequate consumer protections resulting in a widespread failure to underwrite loans to borrowers based on their ability to repay. The standards also should require that all rate and payment disclosure information include full disclosure of the borrower's monthly payment at the fully amortized, fully indexed rate, not just the introductory rate, consistent with the approach of the guidance that the FDIC and other agencies have issued." "The legislation before us, like all regulatory interventions, requires a balancing of interests," said Bachus. "The competing values in this case are the availability of credit on one side and protecting borrowers from sharp practices and unethical conduct on the other. Our task is to strike an appropriate balance between these costs and benefits." For more information, visit www.namb.org or www.house.gov.
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