To Catch a Predator January 27, 2007
Syndicated Columnist Kenneth Harney will report in his column tomorrow morning that the new chairman of the House Financial Services Committee, U.S. Representative Barney Frank, a Democrat from Massachusetts, has made it clear that his top priority will be enacting nationwide mortgage lending standards to protect consumers from predatory lending.
I was recently asked by a national housing coalition to sign an endorsement letter for the purpose of showing Congress that there is broad support for federal anti-predatory lending standards which do not preempt state laws. These ideas will be included and give to Rep. Barney Frank:
As Congress begins a new session, we respectfully ask that any new anti-predatory lending legislation be based on the following principles:
- Considering a borrower’s ability to repay in lending
- Eliminating the incentives for steering borrowers into predatory loans
- Ensuring that loans are serviced fairly
- Protecting the right to go after predatory lenders
- Preserving states’ rights to protect against predatory lending
- Preventing foreclosures
Let the wild debate between banks/mortgage brokers and consumer advocate groups begin! This is one area where the banks and brokers will more than likely combine their lobbying dollars together.
The biggest concern I have for any new federal law is: How are we going to regulate this? Is the money going to come out of my tax dollars? I don’t think so. IMHO the money can come from the profits of bank, credit unions, lenders, and brokers. If you don’t want to self-regulate your own industry, then please don’t make the rest of us pay for it.
We can always ask Chris Hansen from Dateline NBC for help. “You’re naked, holding a container of cool whip and you’re trying to sell an adjustable rate, interest only, pay option ARM to the cute 18 year old mortgage lending prospect in the next room. Is that accurate?”
Check out these related posts:
- Mortgage Brokers and Loan Originators Should Support HR3915
- Children, Can You Say “Suitability”
- Winds of Change; The Rise and Fall of the Subprime Market
Article Tags>> Barney-Frank | Dateline-MSNBC | mortgage-bankers | mortgage-brokers | predatory-lending-legislation
- Posted in : General Real Estate
- Author : Jillayne Schlicke
Comments»
Jillayne,
Okay, I’m disgusted. Comparing unsavory loan originators to sex offenders? How about the teachers who have taken prey upon students…such as our own local Mary Kay?
Can we agree we have unsavory individuals in every walks of life?
Yes we can agree on that.
There are also incredible people in all walks of life, and there is everyone else in the middle. Then there are the folks who show us a surface level of virtue, but their actions show something else.
I am offering a humorous idea of how our federal government might plan to regulate any new federal predatory lending law.
I guess I am immune to the disgust and now just try to laugh because it’s so sad. Open up your spam bin and see, right next to the viagra and porn spam, your daily dose of refi spam.
Rhonda, how do you think any new law that might pass could be regulated? I think it would be very difficult without a LOT of money set aside.
Maybe we should go straight to firing squad
Firing Squad? No way!
Maybe it’s because I love learning and spend a great deal of time helping people grow, but I have a foundational belief that most all people want to develop themselves and grow in this area.
Almost all loan originators and loan officers I meet tell me that they want to do the right thing by their client but sometimes they just don’t know what the “right thing” is. If a loan originator finds himself or herself in an environment where what’s rewarded is making as much money as you can off the consumer, then this is what the loan originator learns.
Much of what we may see in any new legislation might come directly from the Ameriquest court settlement in which they promised to stop paying their loan originators this way.
http://www.atg.wa.gov/releases/2006/rel_Ameriquest_012306.html
My view of human nature is that we are all able to learn and grow…as long as a person’s environmental conditions support this.
I’m for the firing squad. But let’s include real estate agents, appraisers, and escrow officers who are predatory or unethical.
Mortgag brokers seem to be the target de jour.
I love mortgage brokers! They keep me busy! They are a constant source of entertainment in my classes and they ask the most interesting questions. I am fascinated by the demise of their reputation with consumers and would love to see the group catapult out of where they are now. It can happen; it is a choice the industry will need to make as a collective group.
The mortgage industry, escrow, appraisals and real estate is a GREAT PLACE to start a career. Glass ceiling? Heck, women (and men) can run their own businesses if they don’t like working for a corporation.
The burden of regulation within all industries that parallel real estate is done by federal and state regulators. With a new federal predatory lending law, which branch of the federal government might be put in charge of regulating this law?
Let’s take a look at RESPA. Signed into law in 1974, when asked how HUD planned on enforcing it, HUD told the industry that they anticipated voluntary compliance and set aside no money to regulate it. Now only recently has HUD stepped up RESPA enforcement.
I think an argument could be made that if HUD just enforced the existing laws now on the books, we might not need any new laws.
So Jillayne, where do Correspondent Lenders fit into this scenario?
Well, where would you place correspondent lenders?
Jillayne, it’s not fair to lump all mortgage brokers with sexual predators. Kind of a cheap…like I was trying to do with Mary K.
Rhonda,
But I’m not doing this.
I posted the reference to Chris Hansen’s TV show as way to show how absurd it would be to try and federally regulate a predatory lending law.
To make the leap that I am calling all mortgage brokers sex predators is not accurate. You’re making too big of a leap. Please slow down and join us in helping RCG readers try to figure out how our government could possibly regulate a new law like this.
Did you read Ken Harney’s article? It would mean massive compliance changes for brokers, bankers and correspondent lenders alike.
Rhonda,
Correspondent lenders are often licensed as mortgage brokers, unless they have received an exemption from state licensing. Since you have just received your new loan originator license, I take it that your employer is both a correspondent and a broker.
To have any teeth, any new national law would also have to include CONSUMER LOAN COMPANIES. At the state level, our company testified that we believe consumer loan companies should not have the ability to call themselves “mortgage companies.” Ameriquest was licensed as a consumer lender.
Jillayne,
When I clicked on the links…that’s what I found…perverts. That’s where I’m coming from tonight. Maybe I didn’t follow your post correctly?
I was actually posting (before I read #10):
My previous post will prove my husband right…never blog and wine in the same night! I wish I would have used Word before posting tonight after seeing my typos…. Anyhow, concerning a correspondent lender, Jillayne…I was asking YOU.… are you answering the question with a question?
The visual I get from this blog is that a Correspondent Lender is the cream in the banker/broker cookie.
I have only worked for one lender so I’m probably not the best person to answer your question of where a correspondent lender fits in this scenario. And where I work, we pass the benefits of being correspondent onto the consumer. I cannot speak for all.
PS: am I a little sensitive? You bet. AR and RCG…recently YSP, SRP and Correspondent? Where’s the Piñata? Jillayane…look at your title of this post? I can’t blame you… I would probably do the same thing and I applaud any efforts to rid ALL unsavory lenders from Washington.
Good Morning Rhonda,
I’m really glad that you had a strong reaction. It is a good sign.
What this tells me is that there are strong feelings not only in you
but in perhaps many, many others in mortgage lending that the
predatory stuff has to stop.
Even someone as honorable as you are with your clients is going to
feel the effects if a new federal law comes to pass. There will be
greater restrictions on what you do every day, the disclosures you
will have to make to your clients, and it will affect profitability
of businesses. The consumer will feel it initially in the form of higher rates and fees because corporations will not just absorb the additional costs, BUT ultimately, the capitalist market will prevail and the companies that can offer the world ethical lending at a fair price will prevail. Indeed there are many companies out there who ALREADY DO what Barney Frank would like to enact as law.
Can mortgage lenders be fair to consumers and still earn a profit?
My answer is YES.
This morning, I realized what a great post this is BECAUSE of the reaction I had. You really got me! I linked this post to the blog interview of you at http://www.mortgageporter.com/reportingfromseattle/2007/01/my_interview_wi.html
Great job, Jillayne!
I agree, this issue has to come to light, and if it takes whip cream to get the mainstream press on board then maybe that is what it will take as sad as that may be. Some of the points that you listed are already being addressed in a proposed bill known as H.R. 1295. The Appraisal Institute and the NAHREP (The National Association of Hispanic Real Estate Professionals) have taken a position on this bill, you may like to check it out because it does make for a good read both the bills and stances.
Even still, while the press really is missing the wave on this one, there have been some press items coming from local reporters in the major metropolitan areas, one report that is interesting was reported on a blog Denver Real Estate News as reported by the Denver Post where the Denver City Council as compiled a task force investigating the amount of foreclosures.
Consumers must be made aware because the only thing that can counter the money of the lending industry in Washington D.C. is votes. But on the up side, at least the milk industry now has in-program advertising.
[...] Children, Can You Say “Suitability” February 2, 2007 If Congressman Barney Frank has his way, all mortgage originators will have to utter those words in the back of their minds when considering loan options for their clients. Frank is not just any member of Congress, he happens to be the new chairman of the House of Financial Services Committee and his top priority is to create national laws to protect consumers from predatory mortgage practices. [...]
[...] Mortgage Brokers and Loan Originators Should Support HR3915 November 9, 2007 Why am I not surprised that mortgage brokers are in a panic over HR3915, the Mortgage Reform and Anti-Predatory Lending Legislation? Back in January, Barney Frank gave everyone ample notice that he was committed to passing anti-predatory lending legislation before the end of 2007. Then the subprime meltdown began, setting a political stage for a perfect storm, putting mortgage brokers right in the path of harm’s way. Bush, your weapons of mass destruction are in the hands of Congress. Or so the mortgage brokerage industry would have us believe. The fear racing through the brokerage community is rampant. Wide-eyed loan originators are dragging themselves into my classroom looking like Iraq war veterans needing post traumatic stress disorder talk therapy, and the bill hasn’t even been put before the full house for a vote yet. Let’s see if we can identify where all the fear is coming from.Establishes a Licensing System for Residential Mortgage Loan Originators We already knew this was coming. Chuck Cross with the Conference of State Bank Supervisors has been working on national loan originator licensing for months. Even better, the current proposed version of HR3915 says we’ll be keeping track of all LOs, including loan originators who work at federal and state chartered banks. This is what the mortgage brokers have said they want. Creates a Residential Mortgage Loan Origination Standard There’s nothing inside this paragraph that sounds too scary. Licensing? Full disclosure? LOs are already required to do these things. What’s next? Oh, here it is: Anti-Steering. Anti-Steering “For mortgage loans that are not prime loans, no mortgage originator can receive, and no person can pay, any incentive compensation (including yield spread premiums) that varies with the terms of the mortgage loan (except for size of the loan and number of loans). Regulations will be promulgated to prohibit mortgage originators from (1) steering any consumer to a loan that the consumer lacks a reasonable ability to repay, does not provide net tangible benefit, or has predatory characteristics, (2) steering any consumer from a prime loan to a subprime loan, and (3) engaging in abusive or unfair lending practices that promote disparities among consumers of equal credit worthiness but different race, ethnicity, gender, or age.” [...]