STATE LEGISLATION
Texas Senate Bill 1167
Members of DFWAMB recently attended a committee hearing chaired by Sen. Royce West who has put forth a bill that basically pushes the broker into a fiduciary relationship with the borrower. It includes the responsibility of the loan originator to provide the borrower with a good faith estimate for every product the borrower qualifies for and any loan that might cost the borrower less. Failure to do so would result in the originator’s liability for damages, attorney fees, and court costs. It forbids the broker from providing any loan that has a prepayment penalty or the potential for negative amortization. It lays out standards for “ability to repay” tests. If a broker or lender violates the proposed rules, the mortgage can be voided. It would impose additional restrictions if the loan falls under the definition of sub-prime. It is too early to tell the fate of this bill but Sen. West has a great deal of respect and influence in the Texas legislature.
During the testimony given by Martin Sisk and myself, Connie Hearn, Sen. West asked if we believed that the broker should have a fiduciary responsibility to the borrower. I responded that we did not believe that was the appropriate relationship, that no broker could guarantee that he had presented the borrower with all possible loan scenarios, or that they could guarantee they had the cheapest rate and price. The broker or loan officer could only offer the rates and terms of the lenders he was approved with and the market might offer products he did not have. It was still up to the borrower to shop and compare rates.
Texas House Bills 10 and 2274 update
HB 10 is the revision of the Mortgage Broker Licensing bill designed to bring the Texas mortgage industry into compliance with the Federal SAFE Act passed last year. This would change licensing renewal to annual instead of bi-annual, require the broker to be registered with the National Mortgage Licensing System (NMLS), remove the $25,000 net financial asset requirement with the participation in a recovery fund, add “financial responsibility” evaluation, and defines a “non-traditional” mortgage as any loan other that a 30 year fixed rate loan.
HB 2274 is the companion bill that amends the Finance Code to authorize the TSML Commissioner to participate in the NMLS and update the Mortgage Broker Licensing Act to accommodate the requirements of the SAFE Act.
HB 10 and HB 2274 will most likely be approved as currently presented.
Home Valuation Code of Conduct
As of May 1st, Brokers and their loan officers will not be able to order the appraisal or talk to the appraisers. If you are like me, I am already finding the lenders are ordering review appraisals more often and more often than not, the reviews are cutting values and hurting the loan process. I recently asked an underwriter if I should pursue getting a rebuttal from my appraiser when the review appraisal cut the value by $100,000 and had any rebuttals changed the value. She was honest enough to say “nope, not once”. NAMB has filed a lawsuit against HUD for enacting this regulation but, so far, there is no indication that it will not be mandatory on May 1st. Brokers will have to learn to adapt and find new ways to meet our borrower’s needs.
Red Flag Rule
Many credit companies and attorney firms are offering prepackaged compliance programs so that the broker can meet the upcoming requirements of the Red Flag Rule designed to protect the consumer’s privacy and confidential information. I have heard that review of the Broker’s compliance and internal procedures will become part of the Broker’s audit.
TSML Advisory Committee
Commissioner Foster recently reported that an is effort being made by the Texas Savings and Mortgage Lending department to convince the NMLS to count the core education classes previously taken by currently licensed Brokers toward the 20 hours of pre-licensing education required by the SAFE Act. HUD continues to demand that everyone must take the Federal licensing test conducted online by NMLS but the State licensing test requirement may be met with the states’ pre-licensing tests already taken. We congratulate Commissioner Foster and his staff for this make-sense approach to meeting the requirements of SAFE. DFWAMB will keep you informed as this evolves.
What can you do to help protect your business and your industry? There nothing more effective than grassroots lobbying of your legislators. Contact your elected officials. Phone calls, hand-written letters and emails to legislators from their constituents aid them in understanding the issues that concern those living in their districts. DFWAMB continues to participate in the dialogue regarding the pending legislation. However, we can't do it alone and unless you act, your voices will not be heard. You will find your legislator's contact information on DFWAMB's website.
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