Mortgage Law Blog, LLC

Mortgage Law Blog reminds readers that the Mortgage Bankers Association will hold its annual Regulatory Compliance Conference September 14 - 16, 2008. 

The conference will be held at the JW Marriott in Washington, DC.

The MBA’s website describes the conference as the “the premier forum for you to attain the most comprehensive, up-to-date information on significant regulatory and compliance issues facing the mortgage banking industry at the federal and state levels.”

The conference includes “an in-depth discussion of the Housing and Economic Recovery Act of 2008, the most sweeping real estate finance and housing legislation in a generation. Attendees of this conference learn about the contents of this law, how its provisions will be implemented and what changes your business needs to make to comply with the new regulations.”

Speakers will cover a variety of topics, including:

• Home Owners Equity Protection Act/Truth in lending Act
• Real Estate Settlement Procedures Act
• Anti-predatory lending requirements
• Home Mortgage Disclosure Act/Fair lending
• Fair Credit Reporting Act/Fair and Accurate Credit Transactions Act
• Federal Housing Administration loans
• Mortgage fraud against lenders
• Servicing
• Secondary market issues

There will also be legislative and litigation updates. 

The final day will include a visit to Capitol Hill to meet with legislators.

To learn more, visit the conference website here.

Tags: Association Activities, Conferences & Events, Consumer Protection, Economic Stimulus, FACT Act, FCRA, FHA Insurance, Fair Lending, Foreclosure, Fraud, HUD & FHA, High Cost Loans, Industry Involvement, Legislation, Loan Servicing, Lobbying, Mortgage Banking - General, RESPA, Regulations, State Regulation, Unfair or Deceptive Acts by the Editor
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The Conference of State Banking Supervisors issued a press release stating that industry attempts to prevent foreclosures are insufficient.

The release stems from the second report entitled “Analysis of Subprime Mortgage Servicing Performance” issued by the State Foreclosure Prevention Working Group (led by 11 states attorneys general and banking regulators, and the CSBS).  The report includes data from subprime servicers for the period from October 2007 to January 2008.  A prior report was issued February 7, 2008. 

The report acknowledged that the number of homeowners receiving loss mitigation help has increased.  But so have the number of homeowners delinquent on payments.  Private initiatives are “barely keeping pace” CSBS noted.

CSBS notes the following major findings from the report:

Seven out of ten seriously delinquent borrowers are still not on track for any loss-mitigation outcome.  The number of borrowers in loss mitigation has increased, but it has been matched by an increasing level of delinquent loans; thus, the relative percentage has remained about the same.  Given creative servicer outreach efforts and increased public awareness of the HOPE Hotline during Oct.-Jan., this large gap suggests a more systemic failure of servicer capacity to work out loans.  

Data suggests that servicers’ loss-mitigation departments are severely strained in managing the current workload.   The report noted that almost two-thirds of all loss-mitigation efforts started are not completed in the following month.  We are concerned that servicers overall are not able to manage the sheer numbers of delinquent loans.  Data suggests that the burgeoning numbers of delinquent loans that do not receive loss-mitigation attention are clogging up the system on their way to foreclosure.  We fear this will translate to increased levels of vacant foreclosed homes that will further depress property values and increase burdens on government services.

Homeowners who do receive loss-mitigation help are most likely to receive some form of loan modification.  The Group said such modifications are a solution that seems to offer better long-term prospects for successful resolution of problem loans.  Many servicers are replacing their use of repayment plans in favor of loan modifications.

To solve the perceived problems, the report suggests that industry and state officials work on:

Developing a more systematic loan work-out system to replace the intensive, individual, “hands-on” loss-mitigation approach.  Initial efforts to develop systemic approaches are far too limited to make a difference in preventable foreclosures.  Without a systematic approach, we see little likelihood that ongoing efforts will make a serious dent in the level of unnecessary foreclosures.  The Group will continue to work with servicers to promote systematic solutions to modify loans in a more streamlined and efficient manner.

Slowing down the foreclosure process to allow for more work-outs.  Targeted efforts to slow down subprime foreclosures may give homeowners and servicers more time to find solutions to avoid foreclosure.  Many states have enacted or are considering such measures, the report noted.

Mortgage Law Blog notes that “barely keeping pace” is still keeping pace.  This would seem to be an accomplishment if the numbers of delinquent borrowers continue to surge as the report suggests.  This is not to suggest that industry sit on its hands, but the industry’s side of the story continues to be lost in the maelstrom.

The Ohio AG, among others, will speak at the Mortgage Bankers’ Association’s Legal Issues and Regulatory Compliance Conference next week.  It will be interesting to hear the views presented.

For a copy of the CSBS press release, click here.

For a copy of the State Working Group’s reports, click here.

Tags: Association Activities, Conferences & Events, Consumer Protection, Foreclosure, Industry Involvement, Loan Modifications/Workouts, Loan Servicing, Lobbying, Loss Mitigation, Mortgage Banking - General, Regulations, State Enforcement, State Regulation by the Editor
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The Mortgage Law Blog reminds readers that the Mortgage Bankers Association’s annual Policy Conference is April 16-17. 

Never in recent memory has there been a more important time to attend this conference. 

The second day of the conference consists of the constituents from various states meeting with and educating members of Congress and/or their staff on issues critical to the industry.  These interactions provide a rare and insightful glimpse into the legislative process and allow the industry to correct many misconceptions and downright misleading information that has been provided to Congress.

More information about the conference can be found here.

Tags: Association Activities, Conferences & Events, Industry Involvement, Legislation, Lobbying, Mortgage Banking - General by the Editor
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TODAY is the early registration deadline for the 2008 Policy Conference of the Mortgage Bankers Association. 

In light of today’s market conditions, there has never been a more important time for lenders and their affiliates to get involved in the critical decisions being made about this industry!

 The MBA describes the Policy Conference as follows:

Join your peers in Washington, D.C. for the 2008 National Policy Conference, April 16–17, at the Washington Court Hotel, and speak to members of Congress about issues that directly affect your business.  Your participation in this event is vital to the outcome of legislation that would have a lasting impact on the real estate finance industry.Congress and the administration will consider policies that affect your company on several fronts, including proposals to:  

• Address the current conditions in the mortgage and fi nancial markets
• Fundamentally reform the way residential mortgages are originated and regulated
• Modernize the Federal Housing Administration (FHA) and make it an effective player once again
• Improve the Low Income Housing Tax Credit (LIHTC)
• Reform how Fannie Mae, Freddie Mac and the other government-sponsored enterprises (GSEs) are regulated and how they work with the market
• Allow judges to change and modify the terms of a mortgage in bankruptcy
  including “cramming down” the principal
• New tax incentives to stimulate the housing market

 As our industry faces challenges, it is vital that you engage with policymakers to ensure that they understand the real estate finance industry. Don’t wait for policymakers to make decisions about your business. Let your voice be heard.

Detailed information can be found here. 

Tags: Association Activities, Conferences & Events, Industry Involvement, Legislation, Lobbying, Mortgage Banking - General, Regulations by the Editor
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Chairman of the House Financial Services Committee, Barney Frank (D-MA), stated that the Committee is drafting legislation designed to “limit the damage” caused by the increase in foreclosures over the last year.

In Chairman Frank’s words:

In concept, we propose to tell those who either originated or purchased mortgages that are now extremely unlikely to be repaid that they should write down their existing obligations to a level that represents current market value. After — and only after — the loss is taken, the government would facilitate refinancing mortgages for homeowners who could meet repayment obligations at the new, written-down level. Of course, not all borrowers would be able to refinance, but the number of foreclosures could still be substantially reduced. This plan would use the Federal Housing Administration’s authority to guarantee certain loans to induce a renewed willingness to lend by private entities that are either unwilling or unable to do so.

Acknowledging that this approach could be viewed as a bailout, the Chairman essentially disregarded that view, stating:

Yes, some people borrowed imprudently. On the other hand, though, it is clear that many of the people in this situation were misled, were deceived or were in other ways the victims of unfair lending practices.

Refusing to respond to their plight would not only be lacking in compassion but would also be bad economics. Everybody — homeowners, lenders, neighbors, indeed our entire economy — is worse off when a foreclosure occurs instead of a prudent write-down and appropriate refinancing.

Actually, the overwhelming majority of economists have been saying for months that bailouts are bad economics for countless reasons.  Bailouts reward people who engage in imprudent behavior.  Bailouts amount to a blatant and arbitrary redistribution of wealth.  Bailouts increase borrowing costs.  Bailouts increase the public tax burden.  Bailouts of the kind that force lenders to take losses also could result in Constitutional “takings” claims against the government funded, naturally, by taxpayers.  Bailouts would keep property prices at artificially high prices, if the prices are actually too high, shutting out low-to-moderate income families and first-time homebuyers. 

Does any of this sound like good economics?  To see the full statement by Chairman Frank, click here. 

Tags: Bailouts, Economic Stimulus, Foreclosure, Industry Involvement, Legislation, Lobbying, Mortgage Banking - General by the Editor
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Mortgage Law Blog reminds readers about two important items that are now only one month away. 

First, the Board of Governors of the Federal Reserve System on January 9, 2008 issued a notice of proposed rulemaking under the Truth in Lending Act.  The Fed proposes revising TILA regulations to prevent unfair, deceptive or abusive practices in mortgage lending. 

The Fed invites comments from the lending community and the public on the proposal.  Comments are due April 8, 2008.

 The Fed’s summary describes the proposal as follows: 

The Board proposes to amend Regulation Z, which implements the Truth in Lending Act and Home Ownership and Equity Protection Act. The goals of the amendments are to protect consumers in the mortgage market from unfair, abusive, or deceptive lending and servicing practices while preserving responsible lending and sustainable homeownership; ensure that advertisements for mortgage loans provide accurate and balanced information and do not contain misleading or deceptive representations; and provide consumers transaction-specific disclosures early enough to use while shopping for a mortgage. The proposed revisions would apply four protections to a newly-defined category of higher-priced mortgage loans secured by a consumer’s principal dwelling, including a prohibition on a pattern or practice of lending based on the collateral without regard to consumers’ ability to repay their obligations from income, or from other sources besides the collateral. The proposed revisions would apply three new protections to mortgage loans secured by a consumer’s principal dwelling regardless of loan price, including a prohibition on a creditor paying a mortgage broker more than the consumer had agreed the broker would receive. The Board also proposes to require that advertisements provide accurate and balanced information, in a clear and conspicuous manner, about rates, monthly payments, and other loan features; and to ban several deceptive or misleading advertising practices, including representations that a rate or payment is “fixed” when it can change. Finally, the proposal would require creditors to provide consumers with transaction-specific mortgage loan disclosures before they pay any fee except a reasonable fee for reviewing credit history.

For a copy of the Federal Register notice, click here. 

* * * 

Second, the Spring Meeting for the American Bar Association’s Section of Business Law will be in Dallas, Texas, from April 10 - 12, 2008. 

The Section of Business Law is active in the banking, mortgage and financial services arenas, and frequently hosts top lawyers in their fields as panelists.  

The ABA posts the following description of the Meeting:

Join the Section for this three-day event in the important legal, financial, business, and cultural center that is Dallas/Fort Worth, ranking with New York and Houston as home to the headquarters of Fortune 500 companies.

There will be more than 80 CLE programs presented by experts from across the country and around the world who will address breaking issues and new developments in all aspects of the global practice of business law.

In addition, in more than 200 committee and subcommittee meetings you will have the opportunity to play a hands-on role in the development of the law and its practice, as, for example, in the drafting of model documents or laws.

For young lawyers, the Section, in partnership with the ABA Young Lawyers Division, is proud to present the Fifth Annual Institute for the Young Business Lawyer in Dallas on Thursday, April 10, 2008. This all-day institute is an incredible opportunity for the young business lawyer to obtain quality, introductory CLE and a wonderful introduction to the benefits of participating in the ABA and the Section of Business Law.

Calling all Law Students! The Spring Meeting offers great opportunities for law students. Your participation in the Section during law school will not only enhance your legal education, but will also equip you to make a smooth transition into your future career. At the Spring Meeting, you’ll have the opportunity to learn more about business law through special programming for law students and by participating in networking events. And if that’s not enough, Spring Meeting registration is FREE to all law students.

The meeting’s social events are designed to promote networking among Section members, connecting the present and future leaders of the profession. 

More information can be found at the ABA’s website announcement here.  A brochure for the meeting can be downloaded here.

* * *

Finally, the Texas Mortgage Bankers Association’s Annual Loan Servicing Conference will be held April 9-10, 2008 just outside Dallas.

The Servicing Conference promises to be another excellent Conference focused on the Loan Servicing industry.  The TMBA’s website describes the conference stating:

Servicing is a dynamic sector of the mortgage business and in this ever-changing regulatory landscape, servicing personnel need to stay up-to-date on the latest developments.

Who Should Attend
Residential mortgage loan servicers including: senior management, servicing managers, department heads, default managers, customer service managers, service providers, attorneys and other servicing personnel.

More information about the Servicing Conference can be found here.

Tags: Association Activities, Conferences & Events, Consumer Protection, Federal Bank Regulators, Fraud, Industry Involvement, Lobbying, Mortgage Banking - General, Regulations, Unfair or Deceptive Acts by the Editor
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Late yesterday, Senate Republicans blocked a test vote on the Foreclosure Prevention Act of 2008 (S. 2636). 

The bill would have allowed judges to change the terms of mortgage loans for borrowers in bankruptcy.  This power threatens to increase costs of mortgage for all borrowers as it undermines lenders’ confidence that loans will be repaid as agreed. 

Democrats fell more than 12 votes short of the needed 60 to get the provision to the floor for a vote.  The Wall Street Journal (paid subscription required) quoted Senator Richard Durbin (D-IL) as saying that the lenders who “created this crisis in America . . . don’t want those people to stay in their homes even if they can make their mortgage payments.” 

This statement seems misguided.  It is widely known that lenders and investors suffer serious damage when borrowers stop paying their mortgages, and bankruptcy filings prolong that process.  In addition, filing bankruptcy harms the borrowers credit for years to come, making any future purchases of homes, automobiles and other items more expensive.

David Kittle, Chairman of the Mortgage Bankers Association, pointed out that the way to keep borrowers in their homes is to pass an FHA Reform bill that will enable borrowers to refinance. 

The President has threatened to veto the measure if it comes across his desk.

Tags: Bankruptcy, Industry Involvement, Legislation, Lobbying, Mortgage Banking - General by the Editor
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The National Association of Mortgage Brokers has issued its Policy Agenda for 2008.  In light of current market conditions, the Agenda contains a substantial list of priority items.  Mortgage reform, consumer protection and FHA loans top the list of key issues.

NAMB President, George Hanzimanolis, pointed out that the Agenda items were “crafted to protect consumers, improve loan disclosures, and ensure that all mortgage originators meet the same high standards of education and professional ethics.”

The Association’s press release noted that the Agenda contains three new major policy positions:

NAMB calls for an independent, government sponsored study/investigation of consumer disclosures that may be contributing to or enabling deceptive sales and marketing practices in the mortgage industry. The study should focus on whether there are disparities in current or proposed consumer disclosure requirements that could confuse or increase costs to consumers

NAMB will promote efforts that ensure direct and/or indirect compensation received by any originator, regardless of distribution channel, is treated equally and in similar fashion to avoid competitive inequities and consumer confusion.

NAMB supports the establishment of a nationwide registry that mandates the inclusion of all loan originators to provide tracking control and strengthen the industry and consumer protection, and supports the establishment of professional standards for all mortgage originators that will mandate minimum pre-employment and continuing education, testing, and complete criminal background checks. 

A copy of the full press release and Agenda can be found here.

Tags: Association Activities, Industry Involvement, Lobbying by the Editor
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The year 2007 was not kind to the mortgage banking industry.  A Reuters story today reported a MortgageDaily.com study showed more than 86,000 jobs lost in the mortgage industry last year, nearly 16,000 in California.  The Mortgage Lender Implode-O-Meter lists 211 companies that closed last year.  MortgageDaily.com’s “Mortgage Graveyard” lists 147 companies failed or went bankrupt in 2007, compared with just 18 in 2006.

Foreclosures are way up.  Losses are way up.  Legislators, regulators and investors threaten to storm the castle doorts.  (See earlier posts regarding pending legislation and Massachusetts Attorney General’s Office).

In such times, it becomes more important than ever to become active supporters of our mortgage banking industry.  One way to become active, protect the industry and meet some great people is to become active in the Future Leaders Program run by the Mortgage Bankers Association. 

As indicated on the MBA’s website, the Future Leaders Program:

is dedicated to identifying and cultivating the next generation of industry leaders by delivering a comprehensive leadership training experience for selected participants through three events offered throughout the year.

As a member of the 2007 Future Leaders group, I can assure that the program is well worth the effort.  This year, participation is probably more important than any time in recent history.  If anyone would like to discuss the program in confidence, I would be glad to do so.

Tags: Future Leaders, Industry Involvement, Lobbying, Mortgage Banking - General, Subprime Lending by the Editor
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Today’s top story in the Wall Street Journal (paid subscription required) criticized the federal and state lobbying efforts of subprime mortgage companies in recent years.  In particular, the article singles out Ameriquest. 

Working with a husband-and-wife team of Washington lobbyists, [Ameriquest] handed out more than $20 million in political donations and played a big role in persuading legislators in New Jersey and Georgia to relax tough new laws. Those victories, in turn, helped blunt efforts by other states to crack down on reckless lending, critics of the industry contend.

The article goes on to say:

Data . . . show[s] that from 2002 through 2006, Ameriquest, its executives and their spouses and business associates donated at least $20.5 million to state and federal political groups. In comparison, over the same time period, Countrywide Financial, another large subprime lender, gave about $2 million in campaign gifts, and spent an additional $6.7 million lobbying in Washington, records indicate. 

The article mentions a number of banks, other lenders and trade groups that also engaged in lobbying efforts. 

I am a fan of the WSJ.  It is the best written, most informative, most pertinent newspaper printed in the US today.  But this particular article shoots for headline glamor, missing the bigger story.  

The article is riddled with fallacies.  I note only a couple.  The article indicates that a primary focus of these lobbying efforts was to “roll back” state laws on so-called “predatory lending.” Presumably, the article is suggesting the goal was to enable subprime lenders to engage in predatory lending activities.  The article is not clear.  However, the banks and certain lenders referenced are not subprime lenders, and certainly are not engaged in predatory lending.  In addition, the trade groups represent a much wider member base than subprime.  Moreover, the banks mentioned are not even subject to most state predatory lending laws due to federal preemption.  The WSJ seems to confuse predatory lending with subprime lending the same way many far less sophisticated articles do.  It should know better.

Further, the issue is not any voracious desire by lenders to engage in predatory activities.  The issue is that lenders must comply with numerous requirements imposed by the varying states, including more than 30 separate state “predatory lending” laws.  Even cities and municipalities have jumped on board, adopting their own local predatory lending provisions.  (At least the states shot down most of these provisions as stepping on the states’ own toes.) 

Rampant regulation in this area is out of hand.  Good lenders pay lots of money every year to do their utmost best to comply with these numerous burdensome, ambiguous and often inconsistent laws.  A good friend of mine tells me that Mavent Inc., a top-notch compliance software company providing compliance assistance to the industry helps lenders check for compliance with over 300 applicable laws.  300 laws!!!

Who do you think bears the cost of complying with all those laws?  It ain’t Santa Claus.

Nevertheless, the parties drafting bills circulating in Congress right now have rejected uniform national standards on predatory lending.  Instead, these bills would prefer the status quo - let every state come up with its own mongrel breed of predatory lending law.  Let the lenders figure it out.  Let the borrowers bear the cost.

That approach may be good for the economic future of my law firm, but it is not good for borrowers.

Tags: Lobbying, Subprime Lending by the Editor
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