FEDERAL LEGISLATION
Final RESPA Rule from HUD
DFWAMB Board members attended a meeting several months ago and asked then NAMB President George Hanzimanolis what action NAMB was preparing to stop HUD from issuing rules mandating the use the of their proposed new Good Faith Estimate. Astonishingly, the answer was that NAMB was not taking any action and would wait until HUD issued their rule and then file suit against HUD. DFWAMB Board members objected to this approach because a court battle would be lengthy, expensive and much more difficult to overturn a ruling than to prevent it in the first place. On December 19, 2008, the National Association of Mortgage Brokers (NAMB) filed suit against HUD. NAMB argues the Final HUD rule creates a bias against mortgage brokers, has a significant adverse impact on small business, and most importantly did not satisfy the main objective, which was simplification and better understanding of the mortgage process for borrowers. Of particular focus is the new mandated Good Faith Estimate form and HUD-1 Settlement Statement. The new forms will be required as of January 1, 2010.
NAHB Files Suit Against HUD. One of the provisions of the Department of Housing and Urban Development's new rule is expected to profoundly change lenders' relationships with builders next year. Specifically it woud bar builders from offering homebuyers discounts that require them to use an affiliated mortgage, title, or settlement company. The ban will remove a competitive advantage for the joint ventures many builders have with lenders On December 22, 2008, the National Association of Home Builders filed suit against HUD to delay the January 16, 2009, implementation of the affiliated business provisions of the RESPA final rule. NAHB argues under the new rule they would be prohibited from offering bona fide discounts and incentives from affiliated companies, such as mortgage and title companies, to home buyers. Brokers have long argued the abuses of affiliated businesses of a builder have prevented home buyers from shopping for better terms or pricing from mortgage brokers unless they agreed to pay more for a property and / or lose upgrade incentives. A Federal District court in Virginia allowed a 90 day stay for to debate the merits of the case. Unless further court action is taken, the 'required use' portion of RESPA's final rule will go into effect April 16, 2009. DFWAMB is working on a bill for the upcoming Texas legislative session to ban builders from offering these types of abusive “discounts” in Texas.
Home Valuation Code of Conduct Updated - On December 23, 2008, the Federal Housing Finance Authority issued an update to the Home Valuation Code of Conduct (HVCC). One of the provisions of the HVCC that will have an impact on mortgage brokers is they will no longer be able to select, order, or compensate the appraiser on any loan that is to be sold to Fannie Mae and Freddie Mac. If you are a lender, all interaction with an appraiser including selecting, ordering and compensation must be done by a department or an individual that is independent of the loan production department and/or an officer that is responsible for the loan production department. The Federal Housing Finance Agency will be issuing further guidance in January to assist lenders with the transition. While some lenders have indicated they are waiting for further clarification, lenders such as Chase and Wells Fargo are requiring brokers to order appraisals from designated appraisal management firms. Make sure you keep in touch with your wholesalers on their policies and how want you to operate so you do not have a disruption in your pipeline.
US Treasury now purchasing FNMA and FHLMC Backed Securities - On Monday January 5, 2009, The US Treasury initiated their purchase of mortgage backed securities as previously announced on November 25, 2008. Mortgage rates have fallen to the mid 4's causing a renewed interest in refinance applications. There has been opposition to this now that U.S. government has an ownership stake in Fannie Mae and Freddie Mac.
Red Flag Rule became law on January 1, 2008 but the FACT Act extended a grace period to businesses, giving them a deadline of November 1, 2008 to become compliant. Recently, the FTC delayed their enforcement of the legislation until May 1st, 2009, to give businesses additional time to build a plan. However, this does not protect your business from potential class action litigation in the event of a breach prior to May 1st.
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