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.
