HR 3915 Mortgage Reform Act of 2007

H.R. 3915 Is Bad For Consumers!

This is a critical time. Our Representatives are considering legislation that limits consumers’ options, will raise the cost of financing of a home, and seriously limits competition in the lending industry. H.R. 3915, in its current form, will seriously decrease the options consumers have in the market place and will hurt first time homebuyers and borrowers that need to consider financing options that do not require closing costs to be paid upfront. It is important that we stand up to HR 3915 and the lobbyists and special interest groups that are pushing it, in order to protect consumers and American Home Owners. Do not think this cannot seriously affect you, if you are a current or future home owner, you will be negatively affected by HR 3915 if it passes in its current form, it must not pass!

Breakdown of H.R. 3915, Proposed Mortgage Reform Legislation

H.R. 3915, otherwise known as H .R. 3915 the Mortgage Reform and Anti-Predatory Lending Act of 2007, is poised to effectively end the practice of brokering mortgage loans as we know it by eliminating YSP or Yield Spread Premium. This bill will not only eliminate a necessary part of the lending mechanism that Americans depend on for home financing, but more importantly, it will hurt consumers by raising their costs for home loan financing, decrease competition, and give consumers less options for financing their homes.

On Monday, October 22, 2007, House Financial Services Committee Chairman Barney Frank (D-MA), along with Representatives Miller (D-NC) and Watt (D-NC), introduced H.R. 3915, the “Mortgage Reform and Anti-Predatory Lending Act of 2007.” Below you will find the full H.R. 3915 bill, a section by section summary, the NAMB Press Release, and NAMB’s Testimony presented before the HFSC.

The bill contains three sections. Title 1 will create a federal duty of care and outlaw steering. The anti-steering language will outlaw incentive compensation and YSP that varies with the terms of a loan. The section will allow indirect compensation if disclosed early in the process. This section also creates a minimum licensing standard for all originators and net worth or bond requirements of $100,000.

Title 2 creates an ability to repay standard and hardwires underwriting guidelines. Underwriting will include a verified ability to repay and take into account amortizing payments. Guidelines will also include taxes and insurance payments when calculating ratios. For refinancing, the act will define and require a net tangible benefit. For prime loans, there is a safe harbor. However, for subprime there is assignee liability and expanded rescission rights. Standards will also create a defense to foreclosure. Severe restrictions will be placed upon first-time homebuyer mortgages with negative amortization features.

Title 3 will expand the existing Section 32 of TILA by reducing the points and fees triggers and expand lender liability. Prohibitions include no balloon loans, no lending without regard to ability to repay, prohibit a pattern or practice of making such loans, restrict late fees, and prohibit the financing of any points/fees. Taken together, the expansive liability and prohibited terms and conditions will make Section 32 lending practically impossible.