By Scott Tennell, GA Chair - Federal
 
     At the end of the previous issue of the Federal Edition of the Government Affairs update, I noted that we would be covering the proposed RESPA rule and the status of the Settlement agreement between OFHEO, Fannie Mae, Freddie Mac, and the New York Attorney General. Since the last update a major piece of Federal Legislation was signed into law by President Bush. On July 30, 2008, President Bush signed into law HR3221 also known as the Housing and Economic Recovery Act of 2008. This is a huge piece of legislation. When I say huge, the last revision to the bill was 694 pages in length. It is also huge in the context so much is in the bill. It is so mammoth I am still referring to notes when I speak on the topic. Given the complexity of the bill and dates when some of this legislation becomes effective, I felt it would be more appropriate to give some highlights to this bill and update on the RESPA Proposed Rule and OFHEO at a later time.
 
HR3221 is an omnibus piece of legislation. Many of you know there have been a number of pieces of proposed legislation at the Federal level in the last 12 - 18 months. HR3221, combined many of them into one piece of legislation. Separately you may know these bills as FHA Modernization Act of 2008, Federal Housing Regulatory Reform Act of 2008, HOPE for Homeowners Act of 2008, S.A.F.E Mortgage Licensing Act of 2008, FHA Manufactured Home Modernization Act of 2008, Foreclosure Prevention Act of 2008, Housing Tax Credit Coordination Act of 2008,Building American Homeownership Act of 2008, Secure and Fair Enforcement Act of 2008, Small Housing Authorities Paperwork Reduction Act, Mortgage Disclosure Improvement Act, and Housing Assistance Tax Act of 2008. As you can see there is a lot here. It is virtually impossible to summarize all the points into short summary. Therefore I will breakout some of the highlighted points that will have an effect to our day to day origination.
 
HOPE FOR HOMEOWNERS PROGRAM - NEW FHA Program
 
Eligibility
1) Mortgage must have been originated on or before January 1, 2008
2) The MINIMUM HOUSING (Front) Ratio must be 31 (Anything below 31 does not qualify.)
3) They cannot afford their current loan
4) They did not intentionally miss mortgage payments and / or commit fraud to obtain the current loan.
5)They do not own second homes

Features
1) 30 Year Fixed Rate Mortgage
2) Maximum LTV 90% (85% to payoff existing lien holders, 3% MIP Premium and 2% towards closing costs)
3) No Prepayment penalties
4) Maximum loan amount 132% of the 2007 conforming limit or $550,440.
5) All subordinate liens must be satisfied.
6) New mortgage is a shared appreciation of future equity between mortgagor and FHA. If the mortgagor sells or refinances the property within the first year, all proceeds go to FHA. If the mortgagor sells or refinances the property after 1 year but before 2 years, then the mortgagor may retain 10% of the profit and FHA shall receive 90% of the profit. For every year up to 5 years the mortgagor receives 10% more and FHA receives 10% less. After 5 years, the profit is split 50/50 with FHA
7) No new subordinate liens for 5 years (HELOCS, 2nds, etc.)
8) Borrower must also make the first mortgage payment otherwise the reps and warranties do not cover a first payment default.
9) Lenders are encouraged to participate in the program, but they are not required to. This is voluntary participation only.
10) Mortgagor shall pay an annual MIP premium of 1.5% payable monthly.
11) Total Aggregate Funding for the program $300,000,000,000.
12) This is a limited program. The program is available from October 1, 2008 - September 30, 2011.

FHA MODERNIZATION

1) FHA loan limits are increased on a permanent basis. Although this section of the Act takes effect October 1, 2008, the loan limits set forth with the economic stimulus package passes in March will remain the loan limits through December 31, 2008. Beginning January 1, 2009, the FHA loan limits will be calculated as follows: one unit properties (higher limits for 2-4 unit properties) is the lesser of 115% of the MSA home price as determined by HUD(but no lower than the a floor of 65% of $417,000) or 150% of the GSE limit ($625,000)
2) Maximum LTV is 100% of the purchase price not to exceed the appraised value; however, the borrower must make at least a 3.5% contribution to the purchase of the property. The contribution can be in the form of closing costs, prepaids, downpayment, or any combination thereof.
3) Seller funded downpayment assistance programs such as Ameridream shall be prohibited effective October 1, 2008. Commuity assistance programs such as SHIP are still allowed. - UPDATE HR 6694 was introduced on August 1, 2008, to re-authorize seller DPA programs. Stay tuned.
4) A family member may loan a borrower money towards the purchase of a property. Any such loan must be recorded as a secondary lien and the CLTV cannot exceed 100% of the value of the property.
5) The HECM (Reverse mortgage Loan limit is set at the GSE limit, $417,000.00
6) FHA Increases Title I loan limits to $25,090 for home improvement loans.
7) Manufactured Housing loan limit for FHA Title 1 loans is increased to $69,678 and it subject to future increases based on inflation.
8) HECM (Reverse Mortgage) origination fees are capped at 2% for loans up to $200,000 plus 1% for the balance of the loan amount above $200,000, with an aggregate total of $6,000.00. In other words, the maximum origination fee for loans over 200,000 is $6,000.00. The fee can be increased on an annual basis by as much as $500.00 based on the consumer price index.
9) HECM (Reverse mortgage) Restrictions - HUD approved lenders are prohibited from being associated with any other type of financial or insurance activity. This language essentially outlaws the HECM advisor program for all originators that are NOT approved by HUD or exclusively an employee of a HUD approved lender.
10) HECM (Reverse Mortgages) can now be utilized for the purchase of an owner occupied property.
11) HUD is required to develop an automated underwriting system (AUS) for those individuals who do not have insufficient credit histories to determine credit worthiness.
12) HUD is required to establish and conduct a program to test the effectiveness of pre-purchase homeownership counseling for eligible homebuyers.
13) A 12 month moratorium beginning October 1, 2008, suspends risk based pricing of MIP.

MORTGAGE FORECLOSURE PROTECTION (VA)
1) A counseling program is to be developed by the Secretary of Defense to prevent or avoid foreclosure of homes owned by members of the military.
2) The stay of foreclosure is extended from 90 days to 9 months following the termination of service of active duty. This provision is effective until January 1, 2011. Afterwards, the stay will revert to 90 days.
3) Maximum rate cap on a mortgage to a vet is 6% for one year after termination of active duty.

GSE REFORM

1) Loan limit is the GREATER of $417,000 or 115% of the MSA median home price established by HUD. In any case the loan limit shall not exceed $625,000. The Federal Housing Finance Agency shall set the new GSE loan limits by January 1 of each year.
2) A new regulator for housing finance is created, The Federal Housing Finance Agency.
3) Fannie Mae and Freddie Mac must seek approval before offering any new loan products except products related to their automated underwriting systems, underwriting criteria or modifications to existing mortgage terms. In addition a public comment must be sought. The regulator is authorized to review Fannie Mae and Freddie Mac activities.
4) The Secretary of the Treasury has the authority to increase the GSE credit lines, purchase stock in the GSE's or any Federal Home Loan Bank. The purpose of the authority is to provide liquidity and stabilization to the housing finance markets. This is authority is only to be used in emergency situations and the Secretary of the Treasury must consult with the Federal Housing Finance Agency and the Federal Reserve board to conclude action is in the best interest of the taxpayer. This authority expires on December 31, 2009.
5) GSE's will be required to fund affordable housing initiative funds for low to moderate income loan programs. The amount of the contribution is 4.2 basis points (.00042) of loan volume.

S.A.F.E MORTGAGE LICENSING ACT

1) ALL loan originators including originators of State chartered banks, credit unions, mortgage lenders, and mortgage brokers must be licensed, complete continuing education, clear criminal background checks, fingerprinted, pass a written exam, and must be added to a national registry.
2) Loan originators of Federally chartered banks are exempt from license, but must complete criminal background checks, fingerprints, and be entered in a registry.
3) Real estate agents functioning as a real estate agent is exempt; however, if a real estate agent is working in the capacity of a loan originator, then they MUST be licensed based on the conditions above.
4) No felony convictions in the last seven years (Note FLORIDA will NEVER license anyone that has a felony conviction for money laundering, bribery, fraud, etc. All other felonies in Florida are subject to the type of crime committed.)
5) An originator must meet a net worth requirement, surety bond requirement, or pay into a State recovery fund. (We need to be very involved in the rule making of this issue. At one point the net worth requirement for an originator was proposed at $1,000,0000.)
6) Loan originators would be required to act in the best interest of the consumer. (A/K/A Fiduciary) Again we need to be very active in this rulemaking to define what does acting in the best interest of the borrower mean?

MORTGAGE DISCLOSURE IMPROVEMENT ACT

1) The only fee a borrower can be charged prior to giving a GFE and TIL is the actual cost of a credit report.
2) A TIL must be provided to the borrower within three days of application. Any revisions must be made within 7 days of the revision and any corrections must be provided at least three days prior to closing.
3) Requires clearer disclosure of adjustable rate mortgages. It is assumed the proposed mortgage disclosures issues by the Federal
Reserve Board shall become the template which improved disclosure shall be made.
4) All features of the loan must be disclosed such as rate caps, prepayment penalties, how the payments adjust on an adjustable rate mortgage, etc.

FIRST TIME BUYER TAX CREDIT

1) Allows an individual or a couple to receive up to a  $7,500 tax credit for purchasing a one unit primary residence, which is their first purchase or at least the first property they have owned in more than three years.
2) There is a recapture (repayment) of the tax credit over 15 years in the amount of 6.67% per year. For example on a max tax credit of $7,500.00, the borrower would pay back $500.25 per year for 15 years. If the property is sold prior to 15 years, the balance owed would be collected the tax year the property is sold. You should think of this a more of an interest free loan from the government.
3) The credit does not apply if bond financing is utilized to purchase the property.
 
      As you can see there is a lot of information here to digest and I was just giving you bullet points and there is more information that affects our business, but not necessarily the origination function most of us perform. It is very important you attend your chapter meetings or at least seek updates from your chapter's government affairs chairperson. The rulemaking is going to be very important and your membership and the membership of your colleagues is critical for the success of this association and the future of your career in the mortgage brokerage industry.

by Tom Morcom - State Government Affairs Chair

     Florida's Commissioner of the Office of Financial Regulation - Florida's Top Mortgage Regulator Resigns. Florida mortgage regulator Don Saxon abruptly resigned Tuesday, August 12, as the state's Cabinet debated his fate.   After Saxon unveiled emergency changes to toughen the state's licensing rules for mortgage brokers, Chief Financial Officer Alex Sink called for his resignation for the second time in three weeks.  This time, Gov. Charlie Crist seconded the motion.

     Before they could vote, Saxon interrupted, offering to step down effective Sept. 30, signaling the end of a state government career that began 33 years ago.
In addition to being Florida's chief Mortgage Regulator, the Commissioner of OFR oversees the Division of Securities and the division of Financial Institutions including state chartered banks
     The Division of Securities protects the investing public from investment and securities fraud while facilitating capital formation in the State of Florida.
      The Division of Financial Institutions charters, examines and regulates state-chartered financial institutions to ensure they operate in a safe and sound manner and in compliance with applicable state and federal laws and regulations.
     Finding a new Commissioner to oversee these complex and diverse industries will be difficult.  The Florida Association of Mortgage Brokers knows Florida's Cabinet will work diligently to find the right person for this important job.
     We also wish Don Saxon well in his retirement and in his future tasks.

Another Week - Another Failed Bank

      On August 26 the FDIC's announced its problem list of banks grew to 117 institutions from 90 at the end of the first quarter. That is largest number on the list since the middle of 2003. In August the FDIC also announced they closed three banks:

     On August 1, First Priority Bank, Bradenton, Florida, was closed by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation (FDIC) was named receiver.  The cost to the FDIC's Deposit Insurance Fund is estimated to be $72 million.
     On August 27, The Columbian Bank and Trust Company, Topeka, Kansas, was closed by the Kansas Bank Commissioner and the Federal Deposit Insurance Corporation (FDIC) was named receiver.  The cost to the FDIC's Deposit Insurance Fund is estimated to be $60 million.
     On August 29, Integrity Bank, Alpharetta, Georgia was closed by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation was named receiver.  The FDIC estimates that the cost to its Deposit Insurance Fund will be between $250 million and $350 million.

     As you can imagine, Florida's new Commissioner of the Office of Financial Regulation will have their hands full keeping all of Florida's financial markets and financial industries stable.  And Mortgage Brokers will continue to play an important role by providing a wide selection of mortgage products available to Florida's citizens.

It's Election Time - Register to Vote and Remember to Vote!

Everyday elected officials make decisions that affect you, your family and your business.  You're choice is whether to be a victim of the process or a participant.  Casting your ballot on Election Day is the only direct control of government you are guaranteed in the United States Constitution and the easiest way to participate in the process.

Electing the right decision-makers is the key to protecting your business.
Vote Like Your Livelihood Depends On It