NAMB feels lifting of LO compensation rule will boost mortgage related jobs and stimulate the economy through less overreaching lending regulations

AUGUST 30, 2011—As the federal government continues to seek new ways to create jobs and reduce burdensome regulation, the Association of Mortgage Professionals (NAMB) recommends that the Administration and Congress encourage the Consumer Financial Protection Bureau (CFPB) to rescind its loan originator (LO) compensation rule. Ever since the early April implementation of the Federal Reserve Board’s (FRB) Regulation Z; Docket No. R-1366, Truth-in-Lending on steering and LO compensation, consumers have experienced a dramatic increase in costs on their mortgages, in addition, the expenses have increased for all mortgage companies and a great impediment has been placed on the vital service of mortgage lending throughout local communities.

“Over the past three years, more than six different federal agencies have implemented new regulations and rules to try to help regulate and protect the consumer against unethical lending practices,” said Michael J. D’Alonzo, president of NAMB. “This has resulted in a further drain on our economy through overlapping and overreaching regulations.”

According to NAMB, regulations placed on the mortgage industry by the Federal Reserve and other regulatory bodies has resulted in good people being denied loans, in addition to the burden of increased consumer costs and a drastic reduction in the base of local mortgage professionals nationwide who provide homeownership opportunities in their local markets.

“When you take away consumer choice, you take away what has made this country great which is healthy competition,” said D’Alonzo. “This regulation, in essence, has established fixed pricing in the mortgage industry causing pricing to go up.”

As with many new regulations coming out of Washington, the new rules and regulations out of Dodd-Frank are overreaching and have slowed down the housing recovery and job creation, as housing remains the backbone of the national economy.

“Instead of really determining the root cause of the mortgage crisis, like loan type, Washington instead has issued new rules and regulations at individuals, rather than tackle the loan type scenario,” said Mike Anderson, vice president and Government Affairs Committee chair of NAMB. “Like the example NAMB used in its testimony before Congress on July 13, 2011, ‘Did the lawmakers legislate, regulate and impose stricter guidelines on pharmacists, doctors or drug stores after the discovery of harmful prescription drugs like Vioxx?’ No, they did not … they simply pulled the product from the shelf. It was loan type that caused the mortgage crisis. By no means is NAMB advocating going back to the days of reckless and irresponsible lending practices; however, with credit overlays, laws and new regulations, the housing recovery is extremely slow to any substantial recovery. LO compensation has caused hundreds and hundreds of small business to shut their doors and countless layoffs of support personnel in the mortgage industry.”

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The National Association of Mortgage Professionals (NAMB)—The Association of Mortgage Professionals, is a trade association of mortgage professionals with membership in all 50 states and the District of Columbia. NAMB provides education, certification and government affairs representation for the mortgage industry. For more information, visit NAMB.org.

Once again the government seems to have thrown the “baby out with the bath water” in trying to correct the flaws in the housing sector. Let’s hope they “get it” and back off some of these overreaching regulations so business can grow instead of stagnate.

Mitzi Anthony is the Marketing Rep for Choice Title, Inc., you can respond here or contact her directly mitzi@choicetitle.com.

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The new guidelines set a standard for appraisal independence. Lenders can exchange information with appraisers, but they cannot “directly or indirectly coerce, influence, or otherwise encourage an appraiser or a person who performs an evaluation to misstate or misrepresent the value of the property.”

Among other rules:

· Banks cannot tell the appraiser of any expected or qualifying estimate of value.
· Banks cannot specify a minimum value requirement for the property that is needed to approve the loan or as a condition of ordering the valuation.
· Banks cannot tie an appraiser’s compensation to loan approval.
· Banks can’t blacklist an appraiser if his valuations fail to meet expected thresholds.

The agencies also clarified that broker price opinions (BPOs) don’t comply with the minimum appraisal standards.

Source: Housing Wire, Jon Prior (12/02/2010)

Gareth Beale is the Marketing Director for Choice Title LLC, you can respond here, or contact him directly Gareth@choicetitle.com

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(a)    No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company.

(b)    Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance.

Now ask any realtor, banker, or  asset manager and this is not the way the REO market has been run. In fact it was the complete opposite, statements like “seller to choose closing attorney”, or “title company seller’s preference” is not only the norm but expected. The original idea was that systems and tools could be put in place to handle large volumes of closings. RESPA obviously saw some risk for corruption, or at the very least, dealings that may not serve the consumer.

The Federal National Mortgage Association (FNMA) must have finally heard this loud and clear because they have now made a dramatic change to their REO addendum on Section 2B, page 1 line 4 to state, “The closing shall be held at a place so designated and approved by the Purchaser.”  I would imagine we will start to see many banks follow FNMA’s lead in the future.  We’ll see…

For more information on REO Properties go to our Closing 101 section or contact Gareth.