Arizona Association of Mortgage Brokers
December 24 is the final day for
writing letters to the FED about the proposed rule that is extremely important to our industry and everyone’s ability to earn a living.
NAMB has sent out a final call to action with the talking points and contact
info (see below).
If you haven't already, please get your letters in!!
Thanks,
Jody
Davis
Government
Affairs
Arizona Association of Mortgage Brokers
Directions for Submitting Comments to the Board
You may submit comments, identified by Docket No. R-1366, by any
of the following methods:
- FAX: (202) 452-3819 or (202) 452-3102.
- Mail: Jennifer J. Johnson, Secretary, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue, NW., Washington, DC 20551.
- All
public comments are available from the Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm
as submitted, unless modified for technical reasons. Accordingly,
your comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in paper
in Room MP-500 of the Board's Martin Building (20th and C Streets, NW.)
between 9 a.m. and 5 p.m. on weekdays.
To
Whom It May Concern:
As a mortgage broker, and
member of the National Association of Mortgage Brokers (NAMB), I write to you
today expressing my concerns with the Federal Reserve Board Proposed Rule
amending Regulation Z - Docket No. R-1366 (F.R. Fed. Reg. 43232). While I
believe it is necessary to address remaining problems in the mortgage market,
the Proposed Rule will ultimately only harm me, the small business mortgage
professional, and the consumers I serve. I request that you strongly
consider my concerns before issuing a Final Rule that could negatively change
the mortgage market landscape, and impede a recovery of the housing industry.
I am greatly concerned with
The Board's proposals addressing originator compensation. The main
alternative would eliminate yield spread premiums (YSP) and remove a vital
consumer choice in how to finance a loan, and limit competition in the mortgage
market by choosing winners and losers. Furthermore, the Board
recognizes that YSP provides a benefit to consumers, but inaccurately characterize
it as an unfair or deceptive practice that can be used to steer
consumers. Choosing to finance closing and origination costs through the
rate allows borrowers to purchase and start building wealth through their home
without requiring significant outlays of cash in addition to the downpayment at
the outset of the loan. YSP allows consumers to compensate originators
for origination services when they pay none, or only some of the origination
fees or closing costs up front. This is a legitimate and legal way for
borrowers to finance those upfront costs through the interest rate. I
believe it is important for The Board to recognize and consider the unintended
consequence that will be caused if the proposal is made final.
The second alternative proposed
regarding originator compensation will require consumers to pay for services
rendered in connection with obtaining a loan either all up front or all on the
back end of through the rate. The proposed rule will remove interim rate
financing options for consumers, potentially limiting their ability to obtain
loans or forcing them to take on more debt over time. For example, if a
consumer desires (or is required in order to qualify) to pay some upfront fees
to reduce the overall costs to be financed over the life of the loan and hence
partially reduce their monthly payment (as opposed to financing any costs
through the rate); they would not be allowed to do so. Instead, if they
do not have enough cash to cover all of the costs up front, (or simply want to
preserve some cash on hand), their only choice would be to finance all of the
costs through the back end at a higher interest rate, higher payment and
overall higher debt.
The Board proposes sweeping
changes to current mortgage disclosures that I believe cause fundamental
problems of practicality and potential consumer confusion. I request that
you consider the following policy recommendations:
- Revise
language of the Proposed Rule to permit either the creditor, or a mortgage
broker or third-party originator, to provide the required pre-application
disclosures.
- Because
the Board has not defined mortgage brokers or other third-party
originators as creditors, and these originators are often the ones making
first contact with consumers and taking applications, the Proposed Rule
poses a compliance problem for creditors, mortgage brokers and other
third-party originators.
- Eliminate
the disclosure of APR, and instead require disclosure of payment terms,
settlement costs and monthly payment.
- Board
testing showed that consumers do not typically understand the APR and do
not use the APR effectively as a shopping tool.
- Establish
a reasonable tolerance threshold, within which certain terms could change
after the final TILA disclosure but prior to closing without requiring
re-disclosure and without triggering an additional waiting period.
In
closing, I would like to present the following policy recommendations that I
believe The Board should strongly consider when developing a Final Rule.
Small businesses offering mortgage loan origination services will be negatively
and disproportionately impacted by the Proposed Rule. For this reason, I
cannot support the Proposed Rule because it will not serve the best interests
of the consumer or the market.
1.
Withdraw the proposed prohibition on payments to loan originators that are
based on the terms or conditions of a loan.
2.
Delay implementation of any final rule until Congress has acted on currently
proposed legislation that would create a new Consumer Financial Protection
Agency
3.
Permit either the creditor, or mortgage broker, or other third-party originator
to provide the required pre-application disclosures.
4.
Eliminate disclosure of the APR and instead require disclosure of payment
terms, settlement costs and monthly payment.
5.
Establish a reasonable tolerance threshold, within which certain terms could
change after the final TILA disclosure but prior closing without requiring
re-disclosure and without triggering an additional waiting period.
6.
Ensure that loan originators retain their ability to receive compensation as a
percentage of the loan amount and not just a flat fee.
7.
Adopt an anti-steering rule that does not affect the mechanism for providing
direct and/or indirect compensation to a mortgage originator, does not limit or
affect the amount of compensation received by a creditor, and does not restrict
a consumer's ability to finance the fees and costs associated with a loan
transaction into the loan amount or rate.
8.
Require originators to disclose the lowest interest rate the creditor would
accept on a given loan.
9.
Address all "up selling" in connection with mortgages and other
financial transactions, not just YSP.
10.
Compliance with the Administrative Procedures Act.
11. Mortgage
companies should be treated in the same manner as lender companies.
Mortgage broker companies operate on net profits after all income and expenses
and treating them differently from lender companies (some of which have fewer
loan originators than mortgage brokers) is bad policy.
The Board’s goals to simplify
and clarify disclosures for consumers and prohibit anti-steering are not
successfully accomplished through the proposed changes. In fact, the
changes, as planned, fail to achieve those goals and contradict their overall
purpose. The offered amendments to Regulation Z make the entire mortgage
process more complex for borrowers, exacerbate and compound the already
complicated practices that exist, and most importantly, eliminate consumer
choice. Therefore, the Board should withdraw the proposed amendments,
perform more qualified consumer testing (utilizing the results in an effective
manner), and engage and confer with seasoned, knowledgeable industry experts to
obtain credible and useful participation to ensure a successful and effective
resolve to achieving the Board’s objectives.
Sincerely,
(Your Name)
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