On Wednesday, the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity held a hearing titled "Mortgage Origination: The Impact of Recent Changes on Homeowners and Businesses." The Subcommittee hearing focused primarily on the impact that new laws and regulations have had on consumers and the availability of credit in the mortgage finance markets.
Most of the groups present as witnesses discussed the profound and often detrimental impact that new industry regulations have had on consumers' access to credit and the overall U.S. economy.
"The recent regulatory changes in our industry have had a profoundly negative impact on mortgage brokers and on consumers," said Mike Anderson, CRMS, vice president of the National Association of Mortgage Brokers (NAMB). "The primary reason why recent regulatory changes have done more harm than good for both businesses and consumers is that these regulations, by design or through implementation, disproportionately target individuals, entities, and the disclosure of information rather than addressing specific issues related to faulty products or bad behavior."
Among those testifying included:
►Sandra F. Braunstein, Director of Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System
►Teresa Payne, Associate Deputy Assistant Secretary, Regulatory Affairs, U.S. Department of Housing & Urban Development (HUD)
►Kelly Cochran, Deputy Assistant Director for Regulations, Consumer Financial Protection Bureau (CFPB), U.S. Department of the Treasury
►James R. Park, Executive Director, Appraisal Subcommittee, Federal Financial Institutions Examination Council (FFIEC)
►William B. Shear, Director of Financial Markets and Community Investment, Government Accountability Office (GAO)
►Anne Norton, Maryland Deputy Commissioner of Financial Regulation, on behalf of the Conference of State Bank Supervisors (CSBS)
►Steve A. Brown, Executive Vice President, Crye-Leike, on behalf of the National Association of Realtors (NAR)
►Henry V. Cunningham Jr., CMB President, Cunningham & Company, on behalf of the Mortgage Bankers Association (MBA)
►Tim Wilson, President, Affiliated Businesses for Long & Foster Companies, on behalf of the Real Estate Services Providers Council, Inc
►Anne Anastasi, President, Genesis Abstract and President, American Land Title Association
►Mike Anderson, President, Essential Mortgage, on behalf of the National Association of Mortgage Brokers (NAMB)
►Marc Savitt, President, The Mortgage Center, on behalf of the National Association of Independent Housing Professionals (NAIHP)
►Sara Stephens, President-Elect, The Appraisal Institute
►Don Kelly, Executive Director, Real Estate Valuation Advocacy Association (REVAA), on behalf of REVAA and the Coalition to Facilitate Appraisal Integrity Reform
►Janis Bowdler, Director, Wealth-Building Policy Project Office of Research, Advocacy, and Legislation, on behalf of the National Council of La Raza
►Ira Rheingold, Executive Director, National Association of Consumer Advocates
“While the financial crisis led to numerous federal and state laws that changed the mortgage origination process, no overall review or cost-benefit analysis has been conducted," said Financial Services Committee Chairman Rep. Spencer Bachus (R-AL). "Our primary concern right now is ensuring that these regulations facilitate an environment where private capital can reenter the mortgage finance markets without cutting off funding for worthy borrowers. We need to restart lending in order to help create jobs and get the housing market going again.”
As noted by Anderson in his testimony, consumer fees have increased substantially as lender and originator expenses per-loan are estimated to have risen by nearly $1,000 from the fourth quarter of 2010 to the first quarter of 2011. It was also noted that consumers are facing increased out-of-pocket costs for appraisals and higher loan fees in order to cover originators’ costs in the event they are required to cure errors on the Good Faith Estimate (GFE), since the loan originator’s compensation cannot be lowered.
The topic of differentiating the definition of a qualified residential mortgage (QRM) with a qualified mortgage (QM) was another topic of contention brought before the Subcommittee. It is the belief of NAMB that the definition of a QM or QRM should include any fixed-rate mortgage with a term of 10 years or more, which is fully amortized and requires full documentation of the borrower’s income and assets. Anderson expressed that NAMB does not believe it is necessary or appropriate that the Federal Reserve Board (FRB) imposing debt-to-income or minimum credit criteria on these mortgages, due to the fact that historical data shows how well these types of loans have generally performed.
"MBA believes the QM and QRM need to be harmonized," said Cunningham Jr., CMB of the Mortgage Bankers Association (MBA) weighing in on the QM/QRM debate. "Both were designed by Congress to achieve the same purpose of ensuring better, more sustainable lending. Regulators should strive to achieve definitions that are essentially the same. Because the QRM as proposed would exclude too many borrowers from the most affordable loans, MBA believes the QM proposal is a much better starting point for both sets of rules."
Stephens, MAI, president-elect of The Appraisal Institute told Subcommittee members that the Dodd-Frank Act passed by Congress last year is not being properly implemented by federal regulators as costs are still being passed on to the consumer.
"Unfortunately, the Federal Reserve’s Interim Final Rule is not faithful to Congressional intent,” said Stephens. “The Appraisal Institute thinks Congress’ intent was right on target. We urge Congress to guide the regulators’ aim, directing them to correct the Interim Final Rule to promote credibility over speed and cost. Many lenders have chosen to outsource the appraisal management function to third-party management companies who pass only a small percentage on to the appraiser actually performing the appraisal service. Current policy leaves consumers completely in the dark. Here, we need transparency between appraisal and appraisal management fees, especially since it is the consumer who pays these fees in nearly all transactions.”