H.R. 3915 "Mortgage Reform and Anti-Predatory Lending Act of 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.

John P. GrantExecutive DirectorNational Association of Responsible Home Rebuilders and Investors1444 N St. NW Suite A2Washington, DC 20005Office: (202) 232-6708Cell: (202) 607-7580narhri2007@yahoo.com


If you are a real estate investor an interested in local and national legislation and the real estate investors voice in these arenas, then you need to join NARHRI to help support the lobby. Go to www.narhri.org, individual memberships are just $25 and if you are a large organization, please urge your members to join individually while you join with a larger membership that fits your organization.

Kim Tucker
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816-523-4400 x 222

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