The article below is from the National Association of Realtors eNewsletter. The initial commentary is mine. Now the House and Senate are finally coming up with some substantive ideas. Raising the FHA loan limits is an action that could have a huge impact on the industry, allowing more first time home buyers into the market. It would also allow for more single loan home mortgages and the recalibration of what a jumbo loan is for the entire industry. Senate wants to raise the limit to $417,000 while the House could go as high as $729,950. I'm pulling for the House version!
Mark Thorngren
Happy Holidays from the Housing Opportunity Program!
Senate passes FHA Reform
After some touch and go moments, last week the full Senate passed FHA reform legislation. The bill was delayed for nearly a month in the Senate as a couple of Senators issued a legislative holds on the bill. Late last week Senators Coburn (R-OK) and DeMint (R-SC) lifted their holds which paved the way for the measure to pass the Senate by a vote of 93-1. Much credit is due to the grassroots effort of REALTORS® in Oklahoma and South Carolina as well as the effort of many REALTOR® volunteer leaders who flew to Washington in early December to specifically lobby for this bill. The bill, S. 2338, differs from the house version, H.R. 1852, in a couple of key areas and the conference committee meetings that will be held to resolve these differences are expected to be contentious. One of the key differences expected to illicit the most debate is the discrepancy in FHA loan limits. The Senate bill increases these limits to $417,000 while the House bill increases these limits to as much as $729,750 in high cost areas. The House bill also gives the Secretary of HUD the discretion to raise this limit by as much as $100,000 in specific markets for a limited time period. NAR has urged Congress to conference the bill as soon as possible, as a reformed FHA program will help homebuyers better afford a home and it will also help homeowners refinance into a safe mortgage product. Read the NAR press release.
For more of Mark Thorngren's Real Estate Blogs visit www.markthorngren.com.
Thursday, December 20, 2007
Fed Weighs in on Mortgage Reform
This report was emailed to me today from Lorie Schweitzer at Flagstar Bank - LorieSchweitzer@FlagstarBank.com
I think most of us would consider these "reforms" to be pretty much common sense considerations that might have kept most lenders and home buyers out of trouble. The point I find especially interesting, is that the Fed may be trying to mandate tax impounds now. Previously, home sellers could choose between having a monthly tax impound included in their mortgage or elect to have their taxes paid in two installments on 1 Nov and 1 Feb each year. The statement says that creditors would have to establish "escrow accounts for taxes and insurance", we'll see what that means as this legislation works it's way through. What follows is the actual article from Business Week.
Mark Thorngren
Today the Federal Reserve Board, under the authority of the Truth in Lending Act, unanimously voted to propose important changes to the mortgage industry. According to Business Week, the following proposed changes would affect subprime loans or those loans the Fed defines as "higher-priced mortgage loans" (loans with rates at least 3 percentage points above a comparable Treasury security for first mortgages and 5 percentage points for second loans, or home-equity loans):
Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers' ability to repay the loan.
Creditors would be required to verify the income and assets they rely upon in making a loan.
Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase.
Creditors would have to establish escrow accounts for taxes and insurance.The Fed also proposed another set of rules for all mortgages, including what the Los Angeles Times called "stricter disclosures on 'yield spread premiums.'" These rules include:
Curb or better disclose broker incentives..
Prohibit coercion of appraisers.
Prohibit loan servicers from engaging in unfair practices.
Require better disclosure overall.The proposal has been submitted for a 90-day period of public comment. After this timeframe, revisions could be made and the proposal must be voted on again. According to the Christian Science Monitor, "the Fed has indicated it would start to implement [the new policies] next year."Proposal highlights from Business WeekStatement by Chairman Ben S. BernankeHow Fed proposal affects legislation
For more Real Estate Information visit Mark Thorngren's blogs at www.markthorngren.com
I think most of us would consider these "reforms" to be pretty much common sense considerations that might have kept most lenders and home buyers out of trouble. The point I find especially interesting, is that the Fed may be trying to mandate tax impounds now. Previously, home sellers could choose between having a monthly tax impound included in their mortgage or elect to have their taxes paid in two installments on 1 Nov and 1 Feb each year. The statement says that creditors would have to establish "escrow accounts for taxes and insurance", we'll see what that means as this legislation works it's way through. What follows is the actual article from Business Week.
Mark Thorngren
Today the Federal Reserve Board, under the authority of the Truth in Lending Act, unanimously voted to propose important changes to the mortgage industry. According to Business Week, the following proposed changes would affect subprime loans or those loans the Fed defines as "higher-priced mortgage loans" (loans with rates at least 3 percentage points above a comparable Treasury security for first mortgages and 5 percentage points for second loans, or home-equity loans):
Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers' ability to repay the loan.
Creditors would be required to verify the income and assets they rely upon in making a loan.
Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase.
Creditors would have to establish escrow accounts for taxes and insurance.The Fed also proposed another set of rules for all mortgages, including what the Los Angeles Times called "stricter disclosures on 'yield spread premiums.'" These rules include:
Curb or better disclose broker incentives..
Prohibit coercion of appraisers.
Prohibit loan servicers from engaging in unfair practices.
Require better disclosure overall.The proposal has been submitted for a 90-day period of public comment. After this timeframe, revisions could be made and the proposal must be voted on again. According to the Christian Science Monitor, "the Fed has indicated it would start to implement [the new policies] next year."Proposal highlights from Business WeekStatement by Chairman Ben S. BernankeHow Fed proposal affects legislation
For more Real Estate Information visit Mark Thorngren's blogs at www.markthorngren.com
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