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TEL: (202) 232-6708 FAX: (202) 232-6709
www.narhri.org
November 15, 2007
NARHRI MEMBER ALERT
H.R. 3915 “Mortgage Reform and Anti-Predatory Lending Act of 2007”
The stated purpose of H.R. 3915 is to prevent the events surrounding the subprime
lending crisis from ever occurring again. A summary of the provisions of this bill as
introduced can be found at the end of this alert. The measure passed committee and is
currently being debated on the House floor. A final vote is expected late tonight,
members can watch the debate tonight on C-Span.
The measure primarily targets the activities of mortgage brokers, not residential real
estate investors. However, because of the potential impact to the overall housing
marketing of this measure, NARHRI has met with Congressional staff and spoken with
lobbyists representing the financial services industry about this measure. This is major
piece of legislation impacting the entire industry and NARHRI wants to provide our
members with both a voice and the latest intelligence reports on the measure.
Again, while this measure governs mortgage brokers, NARHRI does have some concerns
about certain provisions and has voiced those to Congress. Mortgage broker associations
have been very active on this bill as well. One of our primary concerns about this bill is
the de facto suitability standards contained in it. Those provisions include language such
as loans must be in the best interest of the consumer and refis must have a net tangible
benefit for the consumer. While on the surface these provisions may seem innocuous,
they concern us greatly because of the potential for lawsuits that could dry up credit and
damage already troubled lenders.
Some of the concerns about lawsuit abuse were addressed in amendments to the measure
added during the committee debate, and continue to be addressed on the House floor.
Class actions lawsuits for violating these suitability standards are prohibited under the
measure. Secondly, actions against lenders for violating these suitability standards would
not be retroactive, and thus only apply to future homeowners who face foreclosure, AND
only apply after regulators promulgate rules defining the best interest of the homeowners
and net tangible benefits.
The House has added some other provisions to this measure that NARHRI does support,
such as stricter regulation of appraisers. We believe that this provision will likely address
many of the instances of fraud that occur in our industry. On the floor of the House today,
a request was also made for a GAO study of the impact of this measure on credit markets
that will begin immediately. An additional issue currently under debate concerns pre-
emption of state law. Debate will continue on which of the provisions in the measure will
be pre-emptive, and which will not. Another issue of contention concerns homeowners
facing foreclosure who have a renter. This measure would allow renters to remain in the
home for a period of 90 days (that number may change very quickly, that is the number
we have as of right now). Lenders oppose this provision because it essentially makes
them landlords.
Despite some of the improvements made to this measure, NARHRI does join many other
associations representing the financial services industry in opposition of the measure in
its current form. NARHRI fully expects this measure to pass the House, however, there is
much work to be done on this bill in the Senate, and thus still many opportunities to
improve it.
NARHRI will include HR 3915 in our members only section November Legislative
Tracking Report next week. We want to make sure that we have the most current
language for our members. Our efforts on this measure will continue and we will update
membership as circumstances warrant. Any member interested in commenting on this bill
may forward them to NARHRI Executive Director John Grant at info@narhri.org or call
(202) 232-6708 or cell (202) 607-7580.
SUMMARY AS OF:
10/22/2007--Introduced.
Mortgage Reform and Anti-Predatory Lending Act of 2007 -- Amends the Truth in
Lending Act to set forth a duty of care standard for residential mortgage loan
originations.
Prohibits steering incentives to mortgage originators, including incentive
compensation and any yield spread premium based on, or varying with, the terms
of a residential mortgage loan.
Directs the Secretary of Housing and Urban Development and other specified
federal banking regulatory agencies to prescribe jointly regulations to prohibit
mortgage originators from steering any consumer to a residential mortgage loan
that is not in the consumer's interest (loans with predatory characteristics).
Sets forth licensing and registration requirements for mortgage originators.
Sets forth minimum repayment standards for residential mortgage loans. Requires
creditors to determine, based on verified and documented information, that a
consumer has a reasonable ability to repay the loan, according to its terms, and all
applicable taxes, insurance, and assessments.
Prohibits creditors from extending credit for residential mortgage loans that
involve refinancing of a prior residential mortgage loan unless the creditor
determines that refinancing provides a net tangible benefit to the consumer.
Subjects assignees and securitizers to liability for certain violations in connection
with residential mortgage loans.
Sets forth defenses to foreclosure.
Proscribes certain practices, including: (1) certain prepayment penalties; (2) single
premium credit insurance; (3) mandatory use of arbitration; and (4) negative
amortization mortgages.
Redefines high-cost mortgages. Prohibits balloon payments for such mortgages.
Revises requirements governing prepayment penalties. Prohibits lending without
due regard to repayment ability.
Prohibits certain creditor practices with respect to high-cost mortgages, including:
(1) recommending default on an existing loan or other debt before and in
connection with closing of a high-cost mortgage that refinances all or any portion
of such existing loan or debt; (2) imposing late fees except according to specified
requirements; (3) exercising sole discretion to accelerate indebtedness; (4)
financing points and fees; (4) structuring certain transactions and reciprocal
arrangements to evade the requirements and prohibitions of this Act; and (5)
charging certain modification or deferral fees, and fees for notification of payoff
information.
Requires pre-loan counseling.