Rain City Guide

1. Comment from Brian Brady
Time November 10, 2007 at 2:19 am

Bring it on but do it right!

http://www.bloodhoundrealty.com/BloodhoundBlog/?p=2200

2. Comment from ARDELL
Time November 10, 2007 at 8:18 am

“But don’t be fooled. Instead of subprime, the loans will be called something else.”

I was thinking that Jillayne. Hopefully there will be a clearer definition besides “subprime” that will prevent a simple name change from rendering the bill useless.

3. Comment from Jillayne Schlicke
Time November 10, 2007 at 9:37 am

Hi Everyone,

Brian has posted a letter to Senator Dodd on Bloodhound supporting NASD-type licensing and other things. Here was my comment to Brian’s readers:

Processors and underwriters need not be licensed. They only need to NOT be supervised by a sales manager whose job and bonus depends on approved loans.

I like the idea of requiring tiered licensing.

In order to change how banks disclose their yield, we would have to change RESPA, a bill that is NOT going to Senator Dodd. This constant whining we hear about banks not disclosing their yield is getting boring. Not gonna happen.

The way people are pouring into HUD counseling offices right now, they need more people in there helping defaulting homeowners. Don’t like taxpayer money going in that direction? VOLUNTEER to help out in one of these places.

Savy investors? No way. Some of these people went to the get rich quick seminars and were lead to their own demise by real estate agents and mortgage people. SOME investors are savy, not all.

We must change the nature of the relationship between the LO (no matter where they work) and the consumer, from that of retail to fiduciary.

HOWEVER, If mortgage brokers could get past all their fear, they might be able to see that if ONLY MORTGAGE BROKERS/LOs had fiduciary duties, they would have the opportunity to differentiate themselves between bank LOs. But right now they’re very stuck on same/same treatment, which I believe is a mistake.

4. Comment from Jillayne Schlicke
Time November 10, 2007 at 9:47 am

Hi Ardell,

Funny you should mention that. At about the April mark this year, Scotsman Guide changed the name in their magazine of subprime loans to “nonprime” loans.

http://www.scotsmanguide.com/default.asp?ID=1094

5. Comment from Colleen Jane McGrath
Time November 10, 2007 at 10:01 am

I have carefully reviewed a summary of the proposed HR3915 Bill and I do not see any language prohibiting the payment of YSPs with the exception of non-prime loans.
This is addressed in the section marked Anti-Steering
and addresses the payment of YSP that benefits the originator and not, heaven forbid, the consumer.
This happened recently to a past client of mine. He was refinanced out of a thirty year fixed rate mortgage at 5.375 and put into a Monthly Neg Am Arm, rate currently 9.79, margin 4.85%. Broker charged him 1% ($3393.00) and took $9500. in YSP¦ AND there is a three year prepayment penalty. A CRIMINAL ACT!! It is the actions of these unscrupulous loan originators that created the momentum for this reform bill. Unfortunately, it will also affect those of us who had our customer’s best interests at heart. I would also like to note that the customer was a minority and his loan officer belonged to the same minority group. As I have seen is often the case, minority loan officers often put the financial screws to their same class minority clients. In this case, the borrowe received cash back in the amount of $54,000 giving up his 5.375% FIXED RATE, just so the loan officer could make $13,000. Disgusting!!!!!

6. Comment from Jillayne Schlicke
Time November 10, 2007 at 10:08 am

Hi Colleen,

Thanks for stopping by RCG. Mortgage brokers have said publicly that they are against predatory lending.

NAMB Director Testifies About Ending Mortgage Abuse Before Senate Subcommittee
http://www.namb.org/namb/NewsBot.asp?MODE=VIEW&ID=199&SnID=1473414

NAMB President Testifies Before Federal Reserve Board Hearing
About Curbing Abusive Lending Practices, Calls for Alternatives to Expanding HOEPA to Effectively Address Issue

http://www.namb.org/namb/NewsBot.asp?MODE=VIEW&ID=185&SnID=1473414

So why do you think they’re opposing this bill?

7. Comment from Colleen Jane McGrath
Time November 10, 2007 at 10:20 am

I believe the opposition rests in the vagueness of the bill and I, for one, would support language that clarifies the intent of some passages, such as the prohibition of financing loan fees in HOEPA loans. These consumers don’t have the money to pay fees which is why they are getting this type of loan to begin with so, this class of borrowers would be penalized as I read the proposed bill.

I would also like to note that I have been in the mortgage business
for over thirty years and have appreciated the fact that homeownership has been opened up to a larger group of people via the plethora of mortgage products, especially over the past five years. While the industry is going back to “old school lending” translation “giving the borrower a loan they can pay back” there is still a demand and a need for mortgage products for those “square pegs”`that do not fit into “round holes”. However, not at the expense of the consumer. I especially applaud the discussion to remove the prepayment penalty, or, at the very least, giving the borrower the option of refinancing without penalty in advance of a rate reset. I never did embrace the idealogy of setting a borrower up to fail……

8. Comment from laxtosnoco
Time November 10, 2007 at 10:51 am

How would enforcement work under this bill? HUD is charged with RESPA enforcement, and the agency’s enforcement resources are spread pretty thin. These new provisions will only protect consumers if loan officers/brokers think there’s a possibility that they’ll get caught breaking the law. If the law’s going to work, it should set aside additional funding for enforcement.

My other concern about the bill is timing. Right now the credit markets are worried about the risk and cost of lending. This bill would add compliance costs, making lending more expensive. This could make mortgage credit even more expensive and harder to come by, prolonging the housing downturn.

9. Comment from Colleen Jane McGrath
Time November 10, 2007 at 11:12 am

I think that the bill will create some uniformity in the market place and allay the concerns of mortgage backed securities investors and make them more willing to invest in mortgage loans. The compliance issues are already in place, just need to be enforced, so I do not see this bill as creating problems in the secondary market.

Also, I really like the requirement for Loan Originators to be licensed as they are in the State of Washington. The criminal background check that was instituted by the State this year has uncovered felons acting as loan officers who had convictions for Identity Theft (can you imagine that!) among other things. Log on to: http://www.dfi.wa.gov/cs/adminactions_2007.htm to check out these deadbeats for yourself.

10. Comment from Jillayne Schlicke
Time November 10, 2007 at 12:26 pm

Hi Colleen,

Here is the language regarding financing closing costs:

“A residential mortgage loan that involves a refinancing of a prior existing residential mortgage loan shall not be considered to provide net tangible benefit to the consumer if the costs of the refinanced loan, including points, fees and other charges, exceed the amount of any newly advanced principal.”

I believe the intent was to prohibit serial refinancing to the point where the principal balance exceed the value of the home when fees and costs are added in. This might not serve the consumer and definitely doesn’t serve the new retail loan originator but it does protects the lender and the investor. But maybe it could serve the consumer if, at that point, the consumer is getting a reality check of their possible financial problems instead of continuing to just refi until they go into default.

When someone is going under financially, and serial refinancing into another 100% LTV loan, they are a bigger credit risk. Rates and fees are higher on their new refi, thereby needlessly eating up home equity that could be better used to sell the home.

11. Comment from Jillayne Schlicke
Time November 10, 2007 at 12:32 pm

laxtosnoco,

You are right on in regards to the existing lax enforcement by HUD. Most of the enforcement has been left up to the states.

On the other hand, I advocate self-regulation.

I’m not so sure it would add too much risk or cost. Compliance systems are already in place on the bank/lending side. Credit markets are worried about the quality of origination and underwriting. The bill says if that piece is not in place, then the lender and subsequently the mortgage broker would have to buy the loan back (The conditions for doing so are lengthy and there are some safe harbor provisions.) So I think the opposite is true, the credit markets should like this bill…..with one big exception.

Investors will not want to be held liable. Honestly, I think this part of the bill is going to be removed before it comes to a full vote, or the bill will fail. Now that WOULD put a damper in the secondary market.

12. Comment from Jillayne Schlicke
Time November 10, 2007 at 12:40 pm

Hi Colleen,

Thanks for the link to the DFI naughty list. I just caught the update to the Todd Love case. I wonder why DFI only banned him from the industry for 10 years? Laundering drug money through an escrow account and forging documents feels like a life ban to me. I wonder how many years he’ll be in jail.

http://www.dfi.wa.gov/CS%20Orders/C-06-165-07-SC01.pdf

13. Comment from Colleen Jane McGrath
Time November 10, 2007 at 3:30 pm

Jillayne - I don’t think HOEPA loans are funded at 100%. Is bill referring to a HOEPA loan being refinanced into another HOEPA loan? Again, language is vague. Bottom line is people that need these types of loans have no cash and no where to go if costs cannot be included in the loan amount. My take on the matter……..

14. Comment from Brian Brady
Time November 10, 2007 at 5:16 pm

“The way people are pouring into HUD counseling offices right now, they need more people in there helping defaulting homeowners. Don’t like taxpayer money going in that direction? VOLUNTEER to help out in one of these places.”

Why? My clients never have that problem. Is it necessary for me to volunteer my time to people who weren’t wise enough to hire me in the first place?

My volunteer efforts are better spent in my community, helping San Diegans clean up from the ashes of the wildfires.

15. Comment from Rhonda Porter
Time November 10, 2007 at 8:26 pm

Colleen,

regarding your comment “I really like the requirement for Loan Originators to be licensed as they are in the State of Washington”…currently in our state, only LOs who work for Mortgage Brokers are required to be licensed. If a LO works for a bank-mortgage company (like Wells Fargo, WaMu, Countrywide, Chase, etc.); they are not held to the same standards.

16. Comment from Rhonda Porter
Time November 10, 2007 at 9:03 pm

Jillayne, there are parts of the bill that may be beneficial and there are others that may be damaging to consumers and the industry. We cannot pick out what parts of the bill we agree with and only have that pass. If this bill passes as it currently stands, it will be a set back for many of those stuck in subprime mortgages needing a way out. I don’t think the cries of those of us in the mortgage industry is about the bill as a whole.

Bottom line, consumers will be punished the most. Why shouldn’t they have the right to make financial decisions for themselves instead of the Congress mandating whether or not they should be able to refi? Net tangible benefit is very grey. And honestly, there are times when I met with a consumer and their reasons for refinancing may not seem clear to me. Sometimes I really have to grill them so I can understand for my own peace of mind “why”. But it’s their choice and it should be.

17. Comment from Apella
Time November 10, 2007 at 9:09 pm

Jillayne,
I am in support of the bill as I agree with both you and Brian. Licensing is a major issue and/or standpoint. I also do not think that the lobby dollar will allow for the bill to affect the secondary market or I should say “Investor”.
Many of the issues that this bill addresses I have seen time and time again only with faces. I have not understood the incorporation of fees above and beyond the value of the property for quite some time now and like wise have seen loan upon loan go to a new investor “found at the last minute” that required a name change (no doubt with a higher payout to the broker).
This bill can in the long run add support to a rating system for the loans packaged and sold as securities. It should be supported and as Brian points out done right. I think that will be the true trick. The industry must self regulate as well.

18. Comment from Jillayne Schlicke
Time November 10, 2007 at 9:51 pm

Brian says, ” Why? My clients never have that problem. Is it necessary for me to volunteer my time (at a HUD counseling office) to people who weren’t wise enough to hire me in the first place?”

That’s right; it’s always someone else’s problem, yet nobody wants to fund the bill.

19. Comment from Jillayne Schlicke
Time November 10, 2007 at 9:58 pm

Hi Rhonda,

“I don’t think the cries of those of us in the mortgage industry is about the bill as a whole.”

I’m really glad to hear that. Do you have any news stories or press releases that would back that up? All I’m reading and hearing is that the whole thing is bad and how many thousands of signatures are on the “no” petition.

“Net tangible benefit is very grey.”

The bill will direct HUD to come up with a list of net tangible benefits that will meet guidelines.

“But it’s their choice and it should be.”

Not really; not anymore when taxpayer dollars are going to be spent bailing them out for their choice.

20. Comment from Jillayne Schlicke
Time November 10, 2007 at 10:04 pm

Hi Shane (Apella),

Brian and I agree on creating a meaningful national licensing system and we’re currently working on a co-authored blog article on this very topic.

Looking back at the S&L crisis and then the emergence of FIRREA and USPAP in the appraisal industry, do you think setting high standards can work for LOs?

21. Comment from Rhonda Porter
Time November 11, 2007 at 7:48 am

“The bill will direct HUD to come up with a list of net tangible benefits that will meet guidelines.” = grey. It’s an unknown at this time.

I’m sorry Jillayne, I still feel the home owners right to make their own financial decisions and to have the opportunity to refinance without the Gov. stepping in to say, “Sorry, we don’t see enough benefit here for you to proceed for your refi”. Or if their scenario barely fits the round peg of the gov. approved refi, LOs and lenders will be too cautious to proceed with the transaction in fear of legal reprocussion.

National licensing of bank and broker LOs should help weed out most of the undesirable LOs.

Taking away options at a time when home owners ARMs are adjusting is going to hurt home owners and prevent them from being able to get decent financing. Many will be forced to more expensive options, such as hard money.

22. Comment from Colleen Jane McGrath
Time November 11, 2007 at 8:59 am

Hi Rhonda - I realize that the DFI licensing requirement only applies to brokers at the moment. Mortgage Bankers and Banks should not be exempt from background checks for their employees as well. A number of banks do have their employees go through background checks before hiring, although I cannot say whether or not Mortgage Bankers employ the same standards as an industry wide practice.

23. Comment from Jillayne Schlicke
Time November 11, 2007 at 10:39 am

Rhonda says:

“I still feel the home owners right to make their own financial decisions and to have the opportunity to refinance without the Gov. stepping in”

A mortgage transaction has transformed into a complex decision. Retail loan originators know way more about the intricacies of the ins and outs of mortgage loan products than an average, random consumer.

We are now all experiencing the result of a knowledge/power imbalance. There has been way too much power and knowledge in the hands of retail LOs. Now the government is stepping in to balance the scales of justice and taking some of that power away from the retail origination side.

If LOs want more power back, then they are going to have to step up to the plate and take on more RESPONSIBILITY and, yes, that means more LIABILITY in the form of becoming a fiduciary, which HR3915 comes excruciatingly close to creating.

Yes, some home borrowers are very knowledgeable and savy but they are the exception, not the rule. Look at it like a bell curve. The majority of home borrowers have no idea how an option arm works, hence, they fell for the teaser rate and now we have massive negative consequences.

I have been saying this for years but I’ll go ahead and say it again: If the mortgage industry wants the government off their back, one way to do it is industry self-regulation of ethical conduct.

As a group, we are all better off taking care of each other and helping each other grow ethically than sitting in our own little forts and doing battle with each other individually, which will result in the government stepping in and telling us what to do.

24. Pingback from The Odysseus Medal competition — Voting for the People’s Choice Award is open | BloodhoundBlog: Real estate marketing and technology blog | Realtors and real estate, mortgages, lending, investments
Time November 11, 2007 at 11:27 am

[...] Here is this week’s short-list of Odysseus Medal nominees: Steve Leung — Reverse offer, Considering the Reverse OfferJillayne Schlicke — HR 3915, Mortgage Brokers and Loan Originators Should Support HR3915Kris Berg — Snowboarding, I may see you on the way downKris Berg — SEO, Chasing My Long Tail - My Truth About SEOBrian Brady — HR 3915, HR 3915: Open Letter to Senator Dodd from a Veteran Mortgage OriginatorJim Duncan — Green building, Green building will soon be invisibleGeno Petro — Big, hungry beast, Big, Hungry BeastSean Broderick — Rubik’s Cube, Reasons Come FirstKris Berg — Trulia, Make checks payable to Trulia.comGeno Petro — First in, last out, First In, Last OutKris Berg — Boomerang, Warning: Boomerang may cause injury to othersKevin Boer — Curbed, Curbed.com = HomeGain Redux; Is History Repeating Itself? Will Curbed.com Start Selling Leads?Dan Green — Flux capacitor, Happy Anniversary, Flux CapacitorJim Watkins — True equity, True Equity - In the Real Estate SenseJoel Burslem — Facebook, Advertising Your Real Estate Business on Facebook [...]

25. Comment from Brian Brady
Time November 11, 2007 at 3:28 pm

“That’s right; it’s always someone else’s problem, yet nobody wants to fund the bill.”

No, Jillayne- it’s the customer’s problem for overextending themselves. If they received faulty or dishonest advice, they should consider a lawsuit against the REALTOR and originator that gave them incorrect advice.

Some people got sold a bill of goods; they should seek remuneration for the aggravation that faulty advice caused. Some people are so caught up in the religion of materialism that they will defy 2nd grade mathematics for the instant gratification. Finally, some people are just deadbeats.

I assure you, that failure is a cogent instructor; ask my 6-year old daughter. She is very careful riding “big waves” on her boogie board because her father loved her enough to let her fail.

26. Comment from Apella
Time November 11, 2007 at 4:18 pm

Jillayne,
I will enjoy reading your co-authored blog post as I am a fan of both of your writings. I will be looking for it.
I agree with higher standards. In my opinion I think that the lending institutes are at a cross roads and that there is a strong possibility of great improvements in standards. The last number that I have heard per Bloomberg/CNBC is that the current dollar amount to counter the lending/mortgage backed securities is something like 35 to 40 billion. Bigger then the S&L bail out.
Licensing for loan officers and originators is one that appraisers have called for as of some time now… years actually. One of the reasons is because appraisers have very little means available to lodge complaints with in many states should they view violations in law or practice by lenders. Appraisers are not the only ones that have had problems in this area as real estate brokers have had problems lodging complaints and even the regulators are not immune as we are seeing with the OFHEO voicing their views on the Cuomo case in New York.
Among higher standards is the need to put into place a regular educational process similar to what we see in the real estate and appraisal industries. I say this because not all states require this in the same way as Washington State and others now do. Michigan at this time does not and is also in the top five states for foreclosures. Does that matter or have a play? At this time I do not know but I think that education will help counter future events or repeats in high foreclosures.
Back to the standards I do like the idea of tier based licensing per experience and/or time under a mentor. Underwriters must be held accountable for the interest that they represent by law or agency as it is their job to ensure and protect the lenders assets and standing similar to that of accounting firms on Wall Street (in my view). Perhaps underwriters do need to be licensed similar to the General in the appraisal industry (highest level of license).
Likewise loans should be mandated as secured by escrowed taxes and insurance. Even if PMI is not applied then at least a transaction insurance policy of some kind should be purchased. I think that a lender “USPAP” would be a great start. Furthermore lenders need to put to an end the appraiser pressure problem with the attitude that we are better then that. If I am a loan broker and my originators are pressuring I want that stopped as it holds great potential for harm of my business. While more loans may need to be originated to counter those lost (need to be pressured) I think that it is a safer route to go if I am the owner of a loan brokerage. In my personal opinion I think that the commission payment structure for origination compensation needs to be reviewed closely as it seems to hold much of the motivation to issues of appraiser and service provider pressure.
The idea of standards is not just limited to the lending or appraisal end of the loan transaction. Much of the problems that we are seeing are from the lack of the rating company’s ability to rate a loan. The lending system needs to consider putting in the placement of a “loan rating system” based on the loan or what I call “Lender/Broker Credit”. A tiered licensing system would add great support for this idea.
The positive is that if the mortgage industry can transgress this cross roads they will be stronger and I think in the long run give the bank end of the lending industry a run for their money… literary.
They (the mortgage lenders) already hold the upper hand in technology use (including the use of blogs) and products as available to the consumer with standards of excellence being one of the last areas to tackle. I wish all of the lending the best and will do what I can as an appraiser to help.
Great question – really made me think! Thanks!

27. Comment from Rhonda Porter
Time November 11, 2007 at 7:49 pm

Wow, Brian. I couldn’t have said that better myself!

Colleen, when I’ve talked to LOs who work for banks, they do not go through near the same hoops as those who are licensed. I would like to have the same rules for all for the consumer sake.

When a borrower who has been wronged by a lender contacts me for help; most don’t know who to turn to or where to complain. It’s a mess.

28. Comment from Jillayne Schlicke
Time November 11, 2007 at 8:29 pm

Hi Brian and Rhonda,

Failure in the form of maxing out credit cards is one thing.

Failure in the form of losing one’s home to foreclosure is something completely different; the stakes are much higher for the adults involved as well as any children in that family.

Class action lawsuits are long, drawn out, and the payout for the consumer comes too little, too late. Individual lawsuits are very expensive. The average homeowner in financial distress from default doesn’t always have several thousand to put down for an attorney’s retainer fee.

Brian, would you let your daughter wade WAY, way out there all by herself and risk something more than just a big wave? No, I don’t think so. You probably have a tolerance for how big you’d let her fail.

The retail loan origination industry must come together and decide where to set the bar between being too paternalistic, and being too permissive.

The government is stepping in with HR3915 because the retail loan origination side isn’t doing anything on their end but letting the homeowner choose to go into the deep water without a boogie board to hold onto, and if they drown, so be it.

29. Comment from Jillayne Schlicke
Time November 11, 2007 at 8:32 pm

Hi Rhonda and Colleen,

For a point of information, I have taught upwards of at least a thousand Loan Originators in WA state now, and 100% of the time, the LOs who came from a banking background have had more basic mortgage education and compliance training than all the other students who have only worked for a mortgage broker or a consumer finance compay.

30. Comment from Diane Cipa
Time November 11, 2007 at 8:35 pm

Rhonda and Brian: You are the good guys and you may just not understand the influence a predator mortgage broker or originator has on a consumer. Anyone involved in the business of closing mortgage transactions has witnessed the misplaced trust. You can’t blame those consumers anymore than you can blame children for eating all the Halloween candy in one night.

The federal government has to step into the void because the MBA and NAMB and too many states have done nothing to protect those consumers.

31. Comment from Jillayne Schlicke
Time November 11, 2007 at 8:44 pm

Hi Shane (apella),

Thanks for your well thought out answer! If I were teaching a class inside this blog thread, you’d get a gold star for that answer.

Here is something that stands out for me in what you said:

“In my personal opinion I think that the commission payment structure for origination compensation needs to be reviewed closely as it seems to hold much of the motivation to issues of appraiser and service provider pressure.”

I believe that the way mortgage brokers (and LOs) are compensated will have to become more transparent. It’s going to transform into something very different than what it is now.

I know mortgage broker LOs are going to say “we already have to disclose our yield and banks don’t.”

Seriously: I do not want to have a RESPA conversation. For those of you who might be tempted to bring that up, I will have to bring out a promise to write a new blog post on the many ways that yield spread premiums are improperly disclosed by brokers/LOs and how the consumer has been lied to over and over again when asked “what is a YSP?”

Brokers, the industry group as a whole has misused YSPs. (You might not have so don’t take this personally) Because of this has been an industry-wide problem, YSPs are going to go away as a form of compensation for subprime loans (if HR3915 passes) and your compensation will transform into something new.

It’s the scary unknown stuff that fuels fear and panic.

But have any of us considered that the future might be even better than it is now?

32. Comment from DB
Time November 11, 2007 at 8:44 pm

I am interested as a historian (rather than a real estate agent) on offering counciling. I am not sure where it was but I think Illinois passed a law that required lenders to offer counciling. This was paid from the lender’s pockets which raised the cost of obtaining loans for people would would otherwise qualify. Do you know anything about this and what impact offering it through HUD may be.

Links are appreciated for my own research if anyone has any.

33. Comment from Jillayne Schlicke
Time November 11, 2007 at 8:48 pm

OMG Diane, I was JUST thinking about you; no kidding. I think I’m going to write a blog article on the many different ways YSP has been explained to the borrower in a way so that the borrower didn’t know that the money was going to the loan originator.

I thought to myself; Diane probably has heard some pretty good ones.

34. Comment from Jillayne Schlicke
Time November 11, 2007 at 8:55 pm

Hi DB,

Consumers were required to obtain counseling from a HUD approved agency if they were receiving a certain type of loan that would trigger predatory lending characteristics. I think you’re right; it was near or in Chicago and it was zip code driven mostly due to the high foreclosure rates in those zip codes.

Here’s a link. The article is toward the bottom of the page:

http://www.housingactionil.org/policy-advocacy/pages1-3/index.html

I can’t imagine that counseling from a HUD approved agency would “drive up the cost” of homeownership. Instead, I would imagine the cost might be offset by the consumer learning how to negotiate away some of the junk fees.

35. Comment from DB
Time November 11, 2007 at 9:36 pm

Thanks for the link…

From the article you linked to in your inital blog entry, it sounds like HUD is only going to be providing computers to help consumer compare mortgage options and a staff who will be sitting around doing not much of nothing but there just in case you can convience them to answer your questions!

– Derek

36. Comment from Chris
Time November 12, 2007 at 9:23 am

After reading the actual legislation and it has passed in the house, I’m confident this bill will get the bad apples out. I’ve been in the industry for 7 years and over the past three have seen so many abuses to the consumer and rampid idiocy by LO’s that don’t belong doing this in the first place that it is time for intelligent legislation…it was time three years ago. Let’s see what happens.

Thanks,

37. Comment from Russ
Time November 12, 2007 at 9:37 am

jillayne:

The counseling law in Chicago was a colossal failure. They had to repeal the law because it was obvious it was not working. In fact, most of the residents of the areas affected protested againt the law because it amounted to redlining. You know a law is bad when Rainbow Coalition is protesting against a Democrat imposed law.

Since it worked so well the first time, the state just signed a new an improved version that will require counseling in all of cook county (of course, non FDIC lenders only) REGARDLESS of FICO scores and income. In effect, the state is now going to be telling millionaires they have to go to credit counseling! It is about to be a massive failure here in the city of Chicago. Even the HUD counselors think it is a bad idea because there is no way they are going to have enough people to handle the volume of loans in the City of Chicago, much less all of Cook County.

The word on the street is that the law will be amedned before it goes into effect next year though to exclude borrowers of certain FICO scores and probably incomes.

38. Comment from Chris
Time November 12, 2007 at 9:38 am

Yeah dude they’ll be called FHA.

39. Comment from Tim
Time November 12, 2007 at 11:11 am

Quick drive by comment from me:

Diane Cipa’s statement is true. In aggregate, unless you are in the business of closing transactions, you have no idea how much YSP is abused. In the meltdown voice of Jim Cramer…”YOU HAVE NO IDEA! None!”

40. Comment from Rhonda Porter
Time November 12, 2007 at 1:51 pm

I thought about Diane’s statement and realized it’s been over 7 years since I’ve sat behind a signing table at an escrow company… a lot has changed since then. We still had our share of bad actors; but I imagine that with all the new programs that came on, it attracted more.

The positive of this market is that many of the bad actors that came in with dreams of easy money will blow away. We just bought a commuter car last night and the car guy, after snickering about me being in mortgage, stated that many of his coworkers left the car biz to become LOs…guess what…they’re returning to the car biz.

If the bad actors are gone from a tough market and national licensing; then the abuses should be diminished as well. We really don’t need (or want) the Government telling Americans who can and cannot refinance their mortgage.

41. Comment from David Shafer
Time November 12, 2007 at 2:02 pm

Fundamentally, if one group of loan originators has to be licensed and another doesn’t, it is unfair.
Licensing does not keep out the bad apples, just ask the insurance and stock/bond industries.
After reading through the legislation, it really does little to help the consumer or hurt mortgage brokers. It is, in fact, only window dressing.
Apella gives us some interesting things to think about, but I see two years from now there simply being no change in behavior from any of the parties, new law or not.
Finally, Colleen has put something out there that is well known in the industry, yet no one has the courage to say about affinity groups taking advantage of people like them. The worse abuses I have seen are hispanics on hispanics and black on black LO/Clients. Colleen you are a brave woman.
For me, since I do little sub-prime work, have a mortgage broker license, yet work for a corespondent lender, the new law, if passed, should not have any good or bad consequences.
Still, will have lots of folks who got those “great rates” from the 1-800 lenders or internet lenders, that got srewed and are in need of solid financial advice, a well structured loan, at a fair price.
And I still have developed many satisfied customers that refer me to their family/friends/co-workers.
I don’t see how this new law will change any of that.
Nor do I see how this new law will help any consumers????

42. Comment from Rhonda Porter
Time November 12, 2007 at 4:38 pm

David, like you, I work for a correspondent lender as well and I’m a licensed loan originator (currently only required by those who work for mortgage brokers). I broker out very few of the the transactions I care for.

It’s my understanding that although all LOs will be registered, those who work for banks will not have the same requirments for clock hour courses or licensing.

However there are issues with this bill that will impact broker, banker and correspondent lender such as how this bill is wanting us to factor in the ability to repay. According to the NAMB conference call I participated in today, we are to not only factor in current income of the borrower, but FUTURE income. How are we to know if a borrower is going to face a job loss or have hours cut back a year from application? Some types of jobs are a little more predictible, such as construction; but we don’t have crystal balls.

I beleive this will hurt consumers who need programs other than full doc. I’ve never been a fan of stated income, but have done some NIV or true no doc loans. These borrowers were qualifed; great credit and down payment. The underwriters decided whether or not the loans worked; they did not have to lie on a loan application about income they do or do not have. Their mortgages are still performing…thankfully they have long term mortgages and are not forced to refinance.

During these times, we need more products to help consumers; not less. We have FHA on one side offering FHA Secure and we have Congress trying to become mortgage underwriters.

I’m sure many changes will still take place with HR 3915.

43. Comment from Roger Ingalls
Time November 12, 2007 at 5:46 pm

I support the idea of setting better standards for the mortgage broker industry. I only wish it was being done by the most informed people.

My greatest worry is that the bill has been crafted by “experts” who do not really understand the issues. The writers of the bill seem to be either consumer advocate groups (intent on only saving the people who cannot seem to understand the financial principles they need to understand), the bankers (who wish to wrest away some of the business and profits they lost in the past 5 years to brokers) and the politicians (who probably do not understand the last mortgage they signed, and only want to be seen as doing “something” for the sake of getting re-elected).

Worse, some of the protections designed to protect the least informed borrowers will end up harming borrowers who are well informed, but who will not fit into cookie cutter loans.

I have seen the bill, and the markup, and I have not seen enough evidence that the mortgage brokers have been allowed to help shape the bill. If the politicians would seek out the honest loan originators (or better yet, reformed dishonest ones), and ask THEM how their competitors cheat their borrowers, we would have a MUCH better result. After all, the best way to make your software secure is to hire former hackers!

In many ways, we know that the bill does not do enough to prevent the abuses that we have seen, and will likely continue to see after a bill is passed. If the writers of this bill could effectively demonstrate their understanding of the workings of the lending business, and the real problems that still exist, I would feel much more comfortable having my career in their hands.

Unfortunately, the mortgage broker industry is woefully underfinanced and poorly represented in the political and public relations war that is being waged right now.

Those of you that can, try to personally reach out to your Congressperson to show them how we have been benefitting our clients with better loan programs, at lower costs, and providing our customers with greater financial education than they receive elsewhere.

Please, become informed, and do not stay apathetically silent! And, if you are one of those lucky brokers who have been extraordinarily blessed financially (my blessings seem to be of a different fashion as of late), please pony up and help NAMB work the hallways of Congress to ensure that an intelligent bill is the final result.

44. Comment from Reba Haas
Time November 12, 2007 at 7:06 pm

Personally, I’m all for any kind of licensing in the mortgage industry as is required in the real estate world. I would love to see predatory lending practices stopped. I’d also like to see (insert Ardell’s favorite word here) transparency in how loan originator’s are paid. Typically when I’m working with buyer clients I end up having to explain to them what their loan officer didn’t cover. Agency law requires agents to show *in writing* what our pay will be - lenders should have to do the same. Most consumers don’t know what “POC” means or “funding fee: correspondent lending” with a dollar amount attached or many of the other terms that may show up on a GFE or a final settlement statement.

45. Comment from Diane Cipa
Time November 12, 2007 at 8:33 pm

Jillayne - I hear you. Great post!

Tim - We ARE the sausage makers.

Rhonda - A couple of years ago a car salesman went crazy on us trying to find out how to get into the mortgage brokerage business because he understood it was such an easy way to make money. He switched into a confidential demeanor like we were brother slime - it was really disturbing and weird. If we hadn’t had a hard time finding the car we wanted, we’d have walked out. There are lots of predators still to go….

I’m with Jillayne. Change always brings opportunity. It’s a scary ride but when you look at it from the other side once you get there, it’s almost always a pleasant surprise.

The younger good guys amongst us just need to know that we had good livings before YSPs and you’ll have good livings without them. It will be okay.

46. Comment from Rhonda Porter
Time November 12, 2007 at 9:01 pm

Diane, I bit my lip hard at one point…it was a long day of haggling with dealers who would not honor their word… when the last dealer, who did actually sell us the car for what they quoted told me about the LOs returning to be car salesmen… it was all I could do to not say “Good!”

I see a part of whats going on as a major correction. LOs who had no business caring for consumers finances are getting out by choice or force; some programs that were rediculous are no longer the Wall Street flavor of the day; and some people who do not have the skill to manage their finances or credit will no longer be home owners. The subprime market did give many opportunities they would not have otherwise. A majority (it’s reported that 85% of subprime loans are performing) are successful. I feel badly for those who could not change their spending/financial habits or who had circumstances happen and may no longer have the options they need to keep their home. I wrote about this back on Valentines Day of this year: No Love for the Subprime Buyer (or something like that).

My concern about this bill is the timing of pulling away more products (many are all ready gone) will further squash families who are hanging on to their home ownership dreams.

47. Comment from Jillayne Schlicke
Time November 12, 2007 at 10:04 pm

Hi Readers,

In comment 38, Russ is showing us a perfect example of why any industry is better off with less government intervention.

The job of the HUD credit counselors, which we are all paying for in the form of our tax dollars, ought to be done by industry, not government.

There’s a portion of the law called the Informed Consent Doctrine in which a professional is required to explain in great depth about the service the consumer is purchasing.

My business partner Kevin Boileau just wrote an article on Informed Consent that will appear in the December issue of the Scotsman Guide. Watch for it and let me know what you think.

Many, many LOs and other readers have posted comments here saying that it’s up to the consumer to read the loan documents and make their own decision with little required assistance from the LO. If this is your opinion, then please spare me the complaints about government intervention and mandatory HUD counseling.

If LOs don’t like that, then LOs are the ones that are going to have to step up to the plate and tell the government, “we will be the ones to counsel borrowers.”

48. Comment from Jillayne Schlicke
Time November 12, 2007 at 10:06 pm

David from Comment #42 gives us this statement:

“I see two years from now there simply being no change in behavior from any of the parties, new law or not.”

That’s interesting, David. Why do you guess this might be the case?
Thanks.

49. Comment from Jillayne Schlicke
Time November 12, 2007 at 10:07 pm

Tim,

I can just hear Cramer say those words every time I read them.

50. Comment from Jillayne Schlicke
Time November 12, 2007 at 10:14 pm

Hi Rhonda,

Tell us more about the conference call!

“NAMB conference call I participated in today, we are to not only factor in current income of the borrower, but FUTURE income. How are we to know if a borrower is going to face a job loss or have hours cut back a year from application? Some types of jobs are a little more predictible, such as construction; but we don’t have crystal balls.”

When underwriting a loan file, the underwriter looks at the whole employment picture, not just current income. He/she looks at how long the borrower has been at his or her current job, if self-employed, for how long, and the underwriter also considers such things as how much of a salary could the borrower earn on the open job market.

I see this as going back to solid underwriting and not crystal ball gazing. Nobody can predict the future, not even underwriters, but we can look at the past and get a pretty good idea of what a person might be able to earn.

Then there are the obvious life changes that may or may not be factored in such as a temporary disability, sudden job loss, and so forth. When you add employment history in with credit history and assets, the ability to predict that a borrower is likely to repay as agreed becomes a much clearer picture.

51. Comment from Jillayne Schlicke
Time November 12, 2007 at 10:18 pm

Roger from Comment #44 says,

“Worse, some of the protections designed to protect the least informed borrowers will end up harming borrowers who are well informed, but who will not fit into cookie cutter loans.”

Yes, this is true. When making a rule/law, one of the ways this is done is to try and come up with a rule that will maximize good consequences for the most number of people, and minimize negative consequences for the most number of people.

That means a (hopefully) small percentage of people will be negatively effected by the rule.

The capitalist system is such that a new business model could spring forth to create new ways of earning profit on helping just such a group of people. I have faith that this will happen.

People who can qualify but don’t fit in with the new rule will find mortgage money.

52. Comment from Jillayne Schlicke
Time November 12, 2007 at 10:21 pm

” If the writers of this bill could effectively demonstrate their understanding of the workings of the lending business, and the real problems that still exist, I would feel much more comfortable having my career in their hands.”

This is a false dilemma, Roger. We will never have such a world. Government was not designed to be experts in all business industries.

The mortgage industry (and any industry) is way better off self-regulating than letting government do it. We didn’t learn our lesson when government handed us the TILA and RESPA in the 1970s so here we are once again.

53. Comment from Jillayne Schlicke
Time November 12, 2007 at 10:35 pm

“My concern about this bill is the timing of pulling away more products (many are all ready gone) will further squash families who are hanging on to their home ownership dreams.”

Hi Rhonda,

Because the loan programs and products were abused by many people in the industry, they’re going away. They’ll come back when the industry can show government that the industry won’t use the homeowner as an object to maximize their own income without regard for the homeowner’s ability to repay.

The mortgage industry has no one to blame but itself.

But now NAMB is trying to blame the government for “taking away” these loan programs.

54. Comment from David Shafer
Time November 13, 2007 at 9:47 am

Why will things not change?
1. Licensing individuals does not guarantee ethical behavior.
Series 7 stock brokers still churn individuals accounts
Insurance salesman still put retired people into deferred variable annuities
CFP’s still put people into risky investments
Licensed mortgage folks will still convince people to get into inappropriate loans

2. Sub-prime has gone away without any help from the government. Does anyone doubt that down the line it will come back? Maybe it will be called someting else, maybe loans will have to be structured differently without YSP. But it will come back and it will be abused. Does anyone know what the foreclosure rate of sub-prime loans was in 2001-2002? Higher than it is now!

3. Large lenders like Countrywide have business models predicated on heavy advertising of rates, 1-800 numbers, and internet portals. You can only do this by having telemarketers answer the phones and take applications. If they had to use experienced, licensed individuals or heaven forbid required to have face to face interviews, then the cost savings go down the tube as well as their business model. They will have to go back to using retail outlets and mortgage brokers/correspondent lenders. But as of now they will continue to have that business model available to them.

4. All those folks leaving the business to go back to selling cars will be back during the next boom period.

The bottom line is that there will always be two competing business models. One, trying to turn mortgages into a commodity sold by folks with no special finance training or experience, competing on rate. While the other model will be a consultive approach with folks who are educated in finance, experienced, and giving the consumer value for their service based on solid, ethical, financial advice.

Some consumers will always be susceptible to the cheap come-ons over rates and will end up with inappropriate loans, expensive fees, etc. Option Arms are still out there, though slightly better with a 5 year fixed option, but still in my opinion a flawed design. By the way has anyone noticed the commercials for option arms, once ubiquitous, have disappeared?

So bottom line for me, is that nothing will change in the business.
I have not been in the business for 20 years like some of you, but have seen the same type of complaints in other businesses and they continue to go about their business the same way, year after year, regardless of legislation.

55. Comment from Jillayne Schlicke
Time November 13, 2007 at 12:39 pm

1. Licensing individuals does not guarantee ethical behavior.
Agreed.

2. Subprime will come back and it will be abused.
Agreed.

3. Large lenders like Countrywide have business models predicated on heavy advertising of rates…
Agreed.
Because any company, bank or broker, that relies heavily on expensive media advertising will always have to pay their LOs a less desirable commission split, there will always be room for hyperlocal small business owners to compete on service, but the competition will be tougher at the local level.

4.All those folks leaving the business to go back to selling cars will be back during the next boom period.
Absolutely; no doubt about it, which is why we must consider raising the barrier to entry NOW.

“there will always be two competing business models. One, trying to turn mortgages into a commodity sold by folks with no special finance training or experience, competing on rate. While the other model will be a consultive approach with folks who are educated.”

AGREED! Which is why I’m stumped as to why the broker community would fight the passage of this federal law. There’s a beautiful opportunity here to leapfrog over banks and BE that educate, consultive choice.

Dave, thanks again for your well-thought out response. I’ve been saying for months now that there are two things that must take place if we’re going to make a difference on the retail origination side:

1) Define predatory lending and and then stop doing it.
2) Elevate the relationship between the LO and the consumer from retail status to that of fiduciary.

HR3915 at least takes a stab at number 1 on my list.

56. Comment from David Shafer
Time November 13, 2007 at 1:13 pm

After actually reading what came out of committee, I agree that the broker community has nothing to worry about. What I don’t see is how this stops predatory lending?
Maybe, my definition of predatory lending is different. I would have a very expansive view of predatory lending that would include, for example, option arms where the consumer could not afford the fully amortizing rate or option arms advertised with a 1% or 2% payment rate. I recognize that there will always be a place for mass advertised mortgages, although I wish steps would be put into place that could control this (face to face interview requirement would be great). If you read the NY Times article on Countrywide lending practices, there can be no doubt that they practiced predatory lending, yet I don’t see how the bill can stop what they did in the future?

Finally, I have learned that a determined consumer will look around until they find someone to give them the loan they think they want (usually only really shopping the rate), whether it is the best loan for them or not. So I remain doubtful, without totaly reorganizing the way loans are sold, that the consumer can be protected from themselves.

If I can pimp my own blog for a second, last month I wrote an article on “why so many folks get a raw deal on their mortgages” that I would love your feedback on. It outlines the impossibility of shopping mortgage companies.
http://shaferfinancial.thewrittenblog.com

57. Comment from Rhonda Porter
Time November 13, 2007 at 2:23 pm

Your blog is nice, David. Do you have a link to your specific article you’re referencing? Is your blog a “bring the blog”?

58. Comment from David Shafer
Time November 13, 2007 at 5:33 pm

Yes it is. I am fairly new to the blogosphere.

Here is the link to the article:
http://shaferfinancial.thewrittenblog.com/?p=789&comment=true

59. Comment from Diane Cipa
Time November 13, 2007 at 5:54 pm

Just a word or two about licensing. If you’re reading this great post on a highly regarded blog site, you are likely intelligent and capable. You might not be able to grasp that there are lots of folks out there who can’t get their act together enough to complete a licensing process.

Licensing sets a minimal standard - a set of hoops to jump through that might seem very easy to you but may be very difficult for the mortgage broker down the street.

In our office, we have a very simple three stage test all job applicants must pass before being granted an interview. If you don’t pass all three - no interview. The folks who pass can’t believe that was the test and can’t believe anyone would fail. The ones who fail can’t believe we are so concerned about accuracy and think they are entitled to the interview so they can have a chance to sell themselves.

The three stages test for the ability to read, comprehend and follow instructions - all characteristics vital to good title and closing work. If you pass this test, we give you license to interview.

Licensing screens out those who at the most basic level, just shouldn’t be in the business - ethical or not. Lay in a base of competency then regulate from there.

60. Comment from Rhonda Porter
Time November 13, 2007 at 9:37 pm

David, we’re totally “off topic”. You have a great blog…I’m going to send you an email siunce I’m getting off track from Jillayne’s post.

61. Comment from Jillayne Schlicke
Time November 13, 2007 at 10:03 pm

Hi David,

So are you a Dostoevsky fan?

62. Comment from Jillayne Schlicke
Time November 13, 2007 at 10:17 pm

Hi Diane,

I like that idea. My next interview question would be, “explain the purpose of title insurance.”

One of the interview questions I ask is, “if you thought you had experienced one of our employeess, managers, or me, doing something unethical, what would you do?”

What they say is irrelevant. Instead, I’m learning about how they process complex dilemmas: Rational, logical, emotional, gut instinct, knee-jerk, judgemental, morally righteous, compassionate?

I say the bar is still set too low for loan originator licensing:

No recent felony convictions
pass an FBI background check
pass a minimum competency test
pay a fee.

HR3915 is proposing minimum required PRE-licensing education, which is SORELY needed in WA state; some states already have mandatory pre-education.

63. Comment from Rhonda Porter
Time November 13, 2007 at 10:43 pm

Jillayne, does HR 3915 require education of mortgage bankers in WA state as it would mortgage brokers?

Minimum is the key word here. It’s my interpertation (another key word) that those who work for bank mortgage companys would only have to be on a national registry. They still would not be held to the same standards as mortgage brokers.

64. Comment from Jillayne Schlicke
Time November 13, 2007 at 10:53 pm

If banks and mortgage brokers are eventually treated differently, personally, I see a HUGE opportunity for the mortgage broker community to differentiate themselves when compared with banks. Brokers can say to the consumer, “we are held to a higher standard than bankers” which would help bring value to the consumer.

The key will be how they ultimately decide to define the word “loan originator.” Will this mean broker LOs, or ANY LO no matter where they work?

The bill that passed the finance committee defines LO as ANY LO, no matter where they work, which is exactly what NAMB has been asking for (yet they loudly oppose the bill.)

States that do not have minimum education standards in place would be required to follow HUD (yet to be created) guidelines. Oh boy.

65. Comment from Rhonda Porter
Time November 13, 2007 at 11:21 pm

I view being a Licensed Loan Originator as an advantage over those who are not. I have received some heat for my views from LOs who do not have to meet state standards and who accuse me of wearing my license as a badge…they’re right. It is a badge; one I had to earn.

Jillayne, it’s my understanding that how the presently stands, there are still differences between banker and broker. Until every residental mortgage originator are held to the same guidelines; the consumer will suffer.

66. Comment from Nancy
Time November 14, 2007 at 7:12 am

I recently heard Richard Hagar speak. One of the things he mentioned is a state that recently passed a loan originator licensing law. (I think it was Michigan or one of those “upper” cold states) anyway what he indicated is that a large percentage of the mortgage brokers (I think like 15% were felons) and could not get a license. Another (I thought large percentage did not pass the test after two tries)
Richard could nail down all the facts all I did was get the “gist” of what he said.

67. Comment from David Shafer
Time November 14, 2007 at 11:16 am

Dostoevsky? Fyodor??
Well it has been a long time since reading him, but I remember enjoying reading his books.

My experience and my sociological inclination inform my viewpoint on this issue.

In other words I doubt that tigers can change their stripes; consumers will still not understand the papers they are signing, some loan officers will behave ethically, while others will not, most loan officers will not go the extra mile to become finance experts, may large lenders will continue to hire anyone with a pulse.

Florida has a pre-licensing course (24 hours) and licensing operation, yet we are at the center of the foreclosure crisis.
Of course, only those working for mortgage brokers have to be licensed, the rest do not. But the new potential law is really aimed at mortgage brokers, although my understanding is that if you work for a lender that is not a bank you would have to be licensed.

Needless to say I wish it were different.

68. Comment from Jillayne Schlicke
Time November 14, 2007 at 1:58 pm

Hi David,

Yes, Fyodor. The reason I ask is that you named your blog after one of his most famous books, and I thought to myself: what a great idea for a blog: the existentialist perspective on mortgage and real estate.

If you decide to write your own material, and it is in this vein, please send me an email so I can check it out.

Now, back to business. I do believe tigers can change their stripes.

Environmental conditions are crucial.

69. Comment from Jillayne Schlicke
Time November 14, 2007 at 1:59 pm

Hi Nancy,

Yes, I have heard those statistics too. It was a north east state where a decent percentage of LOs could not pass the exam, no matter how many times they took the exam.

However, in WA state, we will not have that problem. The pass rate here is very high for LOs: 89% at last report. This means their exam is too easy.

70. Comment from Jillayne Schlicke
Time November 14, 2007 at 2:04 pm

Hi Rhonda,

“Jillayne, it’s my understanding that how the presently stands, there are still differences between banker and broker. Until every residental mortgage originator are held to the same guidelines; the consumer will suffer.”

I have mixed feelings about this.

First, banks and brokers ARE different. To treat them the same would be…..in a way, unfair.

Second, an average, random consumer doesn’t know the difference between a banker, a broker, a credit union, and a consumer finance company, so to have an uneven baseline is unfair to an average consumer.

We have federal law that gives us all the minimum standards (state law can be more strict) however, even under federal law, these entities are treated differently.

So we must change federal law if we want the playing field to be even in this one area.

My mixed feelings lead me to a conclusion that it is in the best interest of the mortgage brokers to be treated differently, to be held to a higher standard than bankers, and consumer loan lenders, simply because then they could use this higher standard to survive, thrive and grow their business as a way to differentiate themselves from their competitors.

Readers, what do you all think?

71. Comment from Mike
Time November 14, 2007 at 2:44 pm

yeah but where does the regulation stop? The sub prime mess was created by Greenspan and Federal reserve members, sure speculative investors, fraudulent brokers and lenders added to current situation but most of the blame falls back on irresponsible monetary policy. Why should we just, “roll over” and once again allow government to go unchecked. Dems and Reps intrude where they have no right, I bet most of them did not even read the entire Bill.

Why does being concerned mean we are whining, the principle of the matter is that HR3915 is illegal, there are other reasonable and viable ways to help the consumer and protect the rights of small honest brokers.

72. Comment from Jillayne Schlicke
Time November 14, 2007 at 2:58 pm

Hi Mike,

Thanks for stopping by RCG.

“the principle of the matter is that HR3915 is illegal,”

How so?

“Why does being concerned mean we are whining’”

Because HR3915 gives brokers what they say they want: and end to predatory lending and an end to the abuse of YSPs.

73. Comment from Jillayne Schlicke
Time November 14, 2007 at 3:04 pm

Hi Mike,

The regulation stops when the industry starts self-regulating. This is the best way businesses have found to get the government off your back. But it requires working together, and setting aside (some) self interest for the interest of the whole group, so that, as Rhonda points out, there is a level playing field where we can all compete by playing with the same set of rules, and we all work to hold each other accountable.

We don’t have that right now, so the government will continue to step in and do the job we all should be doing.

After this law goes through, then there will be another one, and another one, and another one. UNLESS we can start down the path of self-regulation.

74. Comment from David Shafer
Time November 14, 2007 at 4:16 pm

Ok, you surprise me. I picked the title as a goof on myself. I am as far away from the protaganist as possible. My personality is totally rational, pragmatism centered in the enlightment and the scientific method. I could no more write from that emotional, outsider perspective than fly to the moon. Believe me I have tried in my younger days to write fiction from that perspective and failed miserably.
I also love Freud. Considered “mortgages and its discontents”, but it didn’t seem to work as well.

Frankly, didn’t think anyone would get the connection, just thought it was a cool name that indicated some uncommon perspectives.

75. Comment from Jillayne Schlicke
Time November 14, 2007 at 10:00 pm

Hi David,

With your sociology background, you could do a Freudian analysis of the mortgage broker community’s fear of HR3915. When you’ve written that article, let me know and we’ll give you some superego blog love.

76. Comment from David Young #510-LO-34429
Time November 15, 2007 at 2:36 pm

So…thought this would be a good place to post….has anyone heard that Countrywide’s Full Spectrum Lending retail side was amputated this morning? I just confirmed it with a friend of mine who was a Branch Manager.

It’s real….it’s here….Countryslide, slide, sliding away.

In other news, Angelo Godzilla just sold 10,000,000$ in his stocks in the past 7 days…

77. Comment from biliruben
Time November 15, 2007 at 3:45 pm

What do you mean, “amputated”?

All I heard was Soros was buying, but did notice a sharp drop in the stock price this afternoon with volume way up.

78. Comment from Jillayne Schlicke
Time November 15, 2007 at 6:36 pm

Hi David,

Full Spectrum was only doing retail, right? So does that mean Countrywide is now out of subprime on the wholesale AND retail side?

Thanks for the tip!

Here are some comments from laid-off Countrywide employees:

http://ml-implode.com/imploded/lender_CountrywideSpecialtyLending_2007-11-14.html

79. Comment from Jillayne Schlicke
Time November 15, 2007 at 6:43 pm

HR3915 passed the House today.

http://thomas.loc.gov/cgi-bin/cpquery/R?cp110:FLD010:@1(hr441)

On to the Senate.

80. Comment from Jillayne Schlicke
Time November 16, 2007 at 4:08 pm

Here are some changes made to HR3915 by Barney Frank. Rhonda’s going to like this one because it means we can finance in closing costs, with some caveats:

“Page 45, strike line 6 and all that follows through line 11 and insert the following new subparagraph:

`(B) restricting a consumer’s ability to finance, including through rate or principal, any origination fees or costs permitted under this subsection, or the originator’s ability to receive such fees or costs (including compensation) from any person, so long as such fees or costs were fully and clearly disclosed to the consumer earlier in the application process as required by 129A(a)(1)(C)(ii) and do not vary based on the terms of the loan or the consumer’s decision about whether to finance such fees or costs; or’.”

Changes:
http://thomas.loc.gov/cgi-bin/cpquery/?&dbname=cp110&sid=cp110QsiiF&refer=&r_n=hr450.110&item=&sel=TOC_9078&

81. Comment from Rhonda Porter
Time November 16, 2007 at 4:30 pm

You’re right, Birthday Girl, I do like that closing costs can be financed. People don’t have to finance their closing costs with a refinance; however a majority do. Especially those who are refinancing do reduce their payments. The choice should be the home owners; not Congress.

We’ll see what happens with this bill in Senate. How about some School House Rock on how a Bill becomes a Law?

http://www.school-house-rock.com/Bill.html

82. Comment from Mortgage Maniac
Time November 27, 2007 at 1:46 pm

Great post. I am new to your blog and I really like what I see. I look forward to your future work.

83. Comment from Mickey Ridings, JD
Time December 2, 2007 at 8:45 am

The Act amends the definition of “Points and Fees” to include yield spread paid to the mortgage broker whether or not it is a table funded loan. The result is that yield spread premium paid to the broker must be included in TIL to calculate the annual percentage rate (APR).

Act Sec. 301( c) amends Section 103(aa)(4) TIL by striking (B) and inserting the following (B) “all compensation paid directly or indirectly…to a mortgage broker from any source, …including…..a table funded transaction”.

The practical result of this is;

The banker quotes a customer for a $100,000 loan, $3,000 closing costs, a note rate of 6.5% (2% YPS or Profit not included in APR) and APR of 6.897%.

However, the broker quotes the customer a $100,000 loan, $3,000 closing costs, a note rate of 6.5% (2% YPS included in APR) and APR of 7.104%.

Result, same deal, broker has to quote a higher APR. “I am just a simple caveman lawyer, these things mystify and confuse me” but I think the customer will be doing business with the banker and not the broker. Just a feeling.

If HR 3915 becomes law the following are some of my predictions;
1. Mortgage brokers will go out of business or become bankers;
2. Additional lenders will implode;
3. Foreclosures and bankruptcies will double;
4. 20% to 30% additional drop in housing sales;
5. A substantial devaluation of residential homes through out the nation;

I remember the “Tax reform Act of 1986”. That Act caused the failure of S & L’s, devaluation of commercial real estate portfolios and bankruptcy of thousands of investors and general partners. HR 3915 since it applies to all home owners will have 10 times the affect of the 1986 tax act.

84. Comment from Vorriece Whitten Jr.
Time December 4, 2007 at 1:22 am

HR3815
The bill that will ultimately regulate the mortgage industry, has been said to have created fear in the mortgage broker &, Loan Originators. The indusrty because of its lack of rules,regulations, guidelines or ethics, if you will,has run a muck and many home owner have suffered significant damages.

Now that the light have been turned on, subprime lenders,brokers and loan originators have been caught TAKING a piece of the pie,with very little shame,guilt or remorse. It seems to me that the benefit to consumer