The Maryland Association of Mortgage Brokers hosted a Town Hall Meeting on June 24 for its membership. The 80-plus members in attandance were briefed on the latest developments as they relate to the Home Valuation Code of Conduct (HVCC) appraisal program, RESPA and Truth-In-Lending changes. The first presenter was Marc Savitt, president of the National Association of Mortgage Brokers (NAMB). His comments were broken down into a number of areas which will be detailed below.
►HVCC: NAMB has met with Fannie Mae, Freddie Mac, their regulators, and New York Attorney General Andrew Cuomo’s office numerous times. While cautiously optimistic, the prediction is that the HVCC, as it is presently in place, is almost sure to be eliminated or substantially modified. MAMB is hoping that the HVCC will simply go away, and the rules for appraisals will just revert back to the laws that were previously on the books. NAMB believes that if those laws are actually enforced properly, then fraud within the industry would be kept in check.
NAMB has anticipated that Cuomo and the federal regulators may insist on something to replace HVCC. Therefore NAMB has developed an alternative. The NAMB proposal provides that when a broker transmits a loan to a lender, the broker would certify in writing that they have followed the presently existing and newly adopted Federal Reserve Board rules under Truth-in-Lending with regard to not influencing the appraisal process. If the lender determines that the broker violated those rules, the lender would be required to report those facts to the appropriate state regulators and enforcement action could be taken either through fines or revoking the broker’s license.
In order to push this development “over the top” it is imperative that MAMB members join with other NAMB state organizations to keep calling the numbers provided in the last NAMB “call to action” to continue the pressure on Attorney General Cuomo and the GSE’s to eliminate HVCC. If brokers have any specific examples of consumers being harmed by the HVCC process please submit the examples in writing to [email protected]
There was also a quick update on the lawsuit that NAMB filed against the GSEs asking the courts to strike down the HVCC. The lawsuit was voluntarily dismissed because the GSEs filed a motion to dismiss “with prejudice.” This means that had the GSEs' motion has been granted, the case could conceivably have been dismissed in a way which would have barred any future refiling of the suit. The GSEs claimed that nobody could sue them right now because they are in conservatorship and did not fall under the normal purview of the law. NAMB did not feel that it was worth the time and money to refute this claim when our purposes could be accomplished outside the judicial process in the political arena. The voluntary dismissal allows NAMB to file the lawsuit again if it becomes necessary.
►RESPA: NAMB President Savitt also reported that there is a new HUD Secretary who seems to be very levelheaded and agreeable. NAMB has met with him and in his most recent statement he said that he is going to move forward with the RESPA rule on GFE and HUD-1 that currently is scheduled to become effective on Jan. 1, 2010, but hopefully change it to match up more with the Federal Reserve Board’s new Regulation Z rules. Hopefully, this means that the Good Faith Estimate will not remain in its currently proposed three-page form. Talks between the NAMB and HUD will continue, but the lawsuit that NAMB has filed against HUD on this matter will remain in play until a compromise is fully reached.
►Obama Plan and Barney Frank Bill: There are two key points of contention with regard to the new Administration’s plan to reorganize the regulatory machinery for depositories and non-depository financial services companies. First of all, the current proposal would impose a severe limitation on mortgage product variety, limiting it to 30-year-fixed loans only, unless otherwise “approved” by a new consumer credit protection agency. This would severely curtail consumer choice. Accordingly, the NAMB has been stressing that one-size does not fit all. Secondly, the plan wants to require that broker fees be paid over time, akin to the lender’s receipt of periodic interest payments on a loan. Mr. Savitt indicated that NAMB intends to keep pushing the point that brokers have nothing to do with the underwriting process and therefore should not be asked to take on the risk of the lender’s credit decisions.
The Barney Frank bill is once again trying to eliminate YSP. NAMB is working to have the terms “YSP” and “SRP” replaced with “indirect compensation” and that in order to level the playing field, all loan originators (brokers, bankers, etc.) would be required to disclose any such compensation. At the moment, the Barney Frank bill seems to be stalled, so the NAMB does not anticipate having to do anything on that front any time soon.
Following Mr. Savitt’s presentation, MAMB legal counsel and frequent classroom instructor, Steve Lovejoy, discussed the more confusing issues associated with the implementation of new rules associated with Truth In Lending (TIL).
►Truth In Lending & Regulation Z: There are quite a few dates coming up that are important. Different things go into effect on each of these dates.
● July 30, 2009: The new rules require that a preliminary TIL statement--expanded to include home equity and owner-occupied second homes (not generally considered to be a commercial rental property)--be provided the consumer within three days after receipt of an application for a mortgage. Until such a TIL is provided, it is illegal to collect any fees, except for those necessary to defray the pass-through cost of a credit report. Additionally, the preliminary TIL must be received by the borrower at least seven days before closing. If anything set forth in the preliminary TIL changes before the loan is made, the lender will require redisclosure. If the preliminary TIL is “inaccurate,” i.e. outside of the tolerance level (1/8 of a percentage point for the APR or $100 in of the Finance Charge) then the redisclosure must be given three days prior to the loan closing. There is no issue if these numbers were over-stated. The seven-day and three-day waiting periods may be waived by the consumer, but only for the same reasons that the rescission period in a refinance transaction may be waived (i.e. bona fide financial emergency, medical emergency, etc). Form waivers will not suffice.
● Oct. 1, 2009: On this date a new “higher cost” loan category will be established. The way to figure out if you are dealing with a higher cost loan is to take a look at the “average prime offer rate” published by the Federal Financial Institutions Enforcement Council at www.ffiec.gov for the type of loan you are offering. For a first mortgage to be considered a “higher cost loan,” it would need to be 1.5 percent or more over the applicable “average prime rate offer” published by the FFIEC on the date that the loan rate is locked in or otherwise becomes firm.
Following Steve Lovejoy’s presentation on the new TILA provisions, all those in attendance agreed that they needed to mark their calendars so that they attend MAMB’s Oct. 7 Continuing Education Forum at the Maritime Institute in Hanover, Md. More will be discussed at that time about Regulation Z changes that will take effect in October, 2009 and April 2010, and the impending changes to the GFE which become effective Jan. 1, 2010.
For more information, visit www.mamb.org.