Mortgage Reform and Anti-Predatory Lending Act of 2009

The Mortgage Reform and Anti-Predatory

Lending Act of 2009

 

The US House of Representatives and the US Senate are debating the benefits of creating more stringent residential lending requirements for the banking industry to prevent future deterioration of the financial markets.  It’s about time.  I encourage you to contact your Representatives and Senators to pass this legislation.  Here are some of the things they’re considering:

 

·         “Banning additional fees paid to loan originators for higher risk / higher profit loans.”  In the last 5 to 10 years, loan originators were allowed to earn higher fees for underwriting riskier loans such as subprime adjustable rate loans, interest only loans, stated income loans, etc.  I would go a step further.  I would reduce their fees for underwriting any loan that is riskier than a 30 year conventional loan.  They will seek the most profit (again) and attempt to place only 30 year conventional loans.

·         “Create minimum national quality standards for all mortgages.”  Didn’t you and I already believe there were strict industry standards for mortgages that were regulated by the federal government.  I guess not.  This is easy, all residential mortgages should have strict quality standards so they can be packaged and sold to investors with predictable and secure returns. 

·         The Bill would “impose a new federal “”Duty of Care”” standard requiring loan officers to offer applicants only terms and rates that are “”appropriate”” to their income and ability to repay.”  Let’s also include in this section that any loan officer not properly doing this, will go directly to jail and the senior officers of the lender/originator will be subject to jail/prison terms.

·         The Bill also suggests that “any lender, or loan originator, who violates the new law will have to pay the legal fees of the borrow to correct the violation of the law.”  The lender and loan originator should also pay the borrower a healthy penalty for violating the law as well as be subject to federal charges by the government.

·         “Originators of all but fully documented 30-year, fixed-rate loans would be required to retain at least a 5% stake in the loan until it’s finally paid off.”  Presumably, the originator would pay any investor (loan purchaser) for the default of the borrowers.

Is it too much to ask that residential mortgages should be packaged into portfolios with similar loans and properly “Rated” based upon their risk parameters?  Can the federal government create strict standards for mortgage portfolios that are sold to investors?  Can the federal government create a formula for “Rating” these portfolios?  Don’t negotiate these standards with the Mortgage Bankers Association or any other lobby group.  Set the standards, create and fund the federal government over-site of those standards.  Why am I passionate about this plea?  The lack of federal regulation has cost the US taxpayers trillions of dollars. 

Please contact your US Representative and US Senator to urge the passage of this Legislation.  If needed, you can find contact information for your Representative and our Senators on my web site (listed below) under any of the Neighborhood Pages, ie. (“Fremont”), and then click on “Manage Your Employees” at the bottom of the page.

Steve Meyers

www.ourseattlehome.com

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