From: "Donkeydode" 
Newsgroups: alt.org.natl-assn-mortgage-brokers
Subject: Re: 'The end of the business as we know it' bill?
Date: Wed, 31 Oct 2007 14:30:05 -0700
Bytes: 5110


"Jeff Strickland"  wrote in message 
news:GWPVi.789$a01.399@trnddc06...
>
> "Donkeydode"  wrote in message 
> news:IBNVi.56180$054.29901@newsfe14.phx...
>> FACTS
>>
>>
>> Reps. Brad Miller (D-NC), Mel Watt (D-NC), and Barney Frank (D-MA) 
>> introduced The Mortgage Reform and Anti-Predatory Lending Act of 2007, 
>> which is intended to provide "comprehensive legislation to combat abuses 
>> in the mortgage lending market."
>>
>>
>>
>> Establishes "nationwide registration regime", prohibit Yield Spread 
>> Premiums (YSP), and will essentially make "No Doc" and "Low Doc" loans 
>> illegal.
>>
>>
>>
>> Requires all mortgage originators operating in any State "which are not 
>> depository institutions or institution-affiliated parties of a depository 
>> institution must meet effective minimum requirements and at all times 
>> maintain a minimum net worth of $100,000 or pledge a surety bond in the 
>> minimum amount of $100,000."
>>
>>
>>
>> Requires "all mortgage originators operating in the State which are not 
>> depository institutions or institution-affiliated parties of a depository 
>> institution are required to receive minimum training and undergo a 
>> background check before receiving a license, and receive ongoing training 
>> or continuing education as a condition for maintaining and renewing the 
>> license."
>>
>> In eliminating YSPs and overages paid to originators for closing loans at 
>> premium rates the legislation provides, "no mortgage originator may 
>> receive from any person, and no person may pay to any mortgage 
>> originator, directly or indirectly, any incentive compensation (including 
>> yield spread premium) that is based on, or varies with, the terms of any 
>> residential mortgage loan."
>>
>>
>>
>> The legislation also includes a provision that "no creditor may make a 
>> residential mortgage loan unless the creditor makes a reasonable and good 
>> faith determination based on verified and documented information." The 
>> legislation wipes away any qualifying benefits offered to consumers 
>> seeking adjustable or non-amortizing interest only loans by requiring 
>> creditors to qualify applicants at the fully indexed rate or a fully 
>> amortizing rate in the case of interest only loans. (OTOct252007)
>>
>>
>>
>> MORAL
>>
>>
>> There are reasons to allow borrowers to come in at start rates.  Among 
>> them is the fact the borrower qualifies now and under normal raises he 
>> reasonably expects to receive based on work history the increase can be 
>> paid when it increases thus allowing him to provide shelter for his 
>> spouse and children. Fully indexed prevents a lot of people from owning 
>> homes. It is like throwing out the baby with the bath water.
>>
>>
>>
>>
>
>
> THE REAL MORAL
> The real moral is that there is no way in hell that normal raises will 
> make a guy with a teaser rate qualify for the same loan after it adjusts. 
> The ONLY way out of these loans is through equity appreciation through 
> increased value. This allows the appreciation to outstrip the neg. am. so 
> the borrower builds an equity position. After a couple of years, his 
> appreciation lets him get a 70% LTV loan, that lets him get a fixed rate 
> that is lower than the adjusted rate that he is facing when the teaser 
> expires.
>
> The fix for the problem we have today is to stop giving teaser rates to 
> people that do not qualify of the home they are looking at. Sometimes you 
> just have to say, you do not qualify.
>
> To make matters worse, in my area it has been reported that 7% of all 
> loans are sub-prime, and that nearly 50% of those went to investors with 
> no equity position at all. An investor got a 100% note, and half of them 
> simply walk away.
>
>
Just to be clear this was an email sent to me from a lender. I agree with 
most of what you are saying. How do you feel about all loan originators 
having a minimum net worth of 100k, and banning all no doc and low doc 
products?