Editorial
Front Page - Friday, October 8, 2010
Changes for mortgage industry gain clarity at meeting
Erica Tuggle
Meghan Sullivan, from the National Mortgage Banker’s Association, traveled from Washington, D.C., to the Chattanooga Mortgage Banker’s Association September meeting to discuss the changes in the mortgage industry that will come with the implementation of the Dodd-Frank Act. She encouraged active participation in the grassroots efforts of the National MBA to keep informed on changes in the law and in touch with state representatives.
- Erica Tuggle
For the September luncheon of the Chattanooga Mort-gage Banker’s Association at the Chattanooga Choo-Choo, the hot topic was mortgage related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These changes and their implications were explained in further detail from the mouth of the National Mortgage Bankers Association in the form of Meghan Sullivan, their director for state legislative and political affairs.
Sullivan came to Chatta-nooga from Washington, D.C., to clarify some of the points of this bill before she boarded the plane that night to return to the nation’s capital.
She says that the recently passed Dodd-Frank bill basically overhauls the nation’s entire financial system and includes several provisions that specifically affect the mortgage lending industry.
Her summary of the legislation is 16 pages long, but the original bill is 2,300 pages and MBA has 10 lawyers still trying to make heads or tails of it, she says. Although the bill technically took effect on October 1, seeing these changes or provisions come into play may be later in the year or the beginning of next year.
She says, the bill creates over 200 new rules and regulations affecting the lending services industry, which will make implementation long and drawn out. Titles IX, X, and XIV are of particular interest to MBA and its members. Title IX is the risk retention provision, which will require lenders to hold back a sliver of risk. Title X establishes the Consumer Financial Protection Bureau and Title XIV is called the Mortgage Reform and Anti-Predatory Lending Act. This latter title is where underwriting requirements, among others, will come into play and will have the most affect on the industry in moving forward, she says.
The Consumer Financial Protection Bureau established in Title X is a new government agency that will roll several existing agencies under one umbrella, she says, and will also give the agency huge and broad authority to write rules to protect consumers against unfair and deceptive financial products, facts, or practices as defined by the CFPB.
The Mortgage Reform and Anti-Predatory Lending Act as stated by Title XIV will affect many things including loan originator’s compensation, underwriting requirements and qualified mortgage provisions, she says.
This creates a new definition of a loan originator as defined as any person either directly or indirectly receiving compensation or gain, taking a residential mortgage loan out, assisting the consumer in applying for a loan, or offering or negotiating a
current loan. Under this provision, a mortgage loan originator is prohibited from steering into any type of mortgage loan and the biggest hit is that it prohibits any other compensation from mortgage loan originators that are based on the terms of the mortgage loan including rate, Sullivan says. This means that compensation on the size of loan or loan volume generated is fair game, but anything having to do with rate or terms is a “no-no” now.
The risk retention provision is another part of the Dodd-Frank act that the MBA has worked tirelessly on, Sullivan says, because it is incredibly im-portant to the small independent mortgage lenders. In terms of risk retention, it directs federal banking rules that require secure loans to retain an economic interest of at least five percent of credit risk. The MBA has successfully retained an exemption for residential mortgages who are shown to be low risk, making for a huge victory, she says.
Many other provisions in-cluding those concerning appraisals, counseling, reverse mortgages, mandatory escrows for certain mortgages, timelines for issuing pay out statements and credit slips, as well as limiting late fees for high cost mortgages, are included in Dodd-Frank. A new rule through the Federal Reserve that requires a consumer to be notified within 30 days of their loan being sold or transferred will be required for compliance by Jan. 1 of next year, she says.
Sullivan says the best way to keep on top of the many changes that will be affecting the mortgage and real estate industry is to get involved. She says the overflow of negative stories about the market make it necessary for mortgage lenders to get the word out about the great things they are doing everyday at their job.
“What everyone in this room does is really wonderful; you put people in homes,” she says. “You need to show public officials and decision makers how hard you work each day at this to make sure people have a roof over their head and a home and a mortgage plan for them that is sustainable.”
The first step is joining the national MBA and the grassroots program they have that will keep an individual up to date on proposed bills, representatives to contact and other opportunities to be heard, Sullivan says.
“The best voice in the process is you all,” she says. “You are 10 times more effective because you come from this state and know what is going on here.”
She then invited everyone to attend the March conference the national MBA has every year in Washington, D.C., with lenders from all over the country that hear from legislators and then go to Capital hill and speak with elected officials to spread the word about progress and grievances.
There is also a closer conference of a similar nature in Atlanta upcoming, and information can be found through Darlene Boyd, the president of the Chattanooga MBA.
Also during the meeting, a contribution was presented to the Habitat for Humanity from the recent golf tournament the Chattanooga MBA had. Bobby Allison presented the check to Keith Palmer, the executive director for the Chattanooga Habitat for Humanity, and then Palmer spoke with gratitude for the funds that will support the Habitat for Humanity’s effort to eradicate poverty housing. Specifically this money will be applied to First Baptist Church of Soddy Daisy and a project the Habitat for Humanity is involved with there.
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