May 6th, 2008
The Board of the Mid Hudson Valley Mortgage Bankers Association is pleased to announce we are hosting our Fifth Annual Networking Mixer at Torches in Newburgh. The event is a great opportunity to bring team memebrs and clients to mix and mingle with industry professionals. It has rapidly become our signature event and is a can’t miss.
The Networking Mixer is sponsored by the National Association of Insurance and Financial Advisors. It will be held on May 21st, beginning at 5pm
To register please go to the Event Registration page on this site. There is no surcharge for non-members and you may pay by credit card. The cost is $45. THis event fills up fast.
See you there…..
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May 6th, 2008
Volume III | Issue 15 | May 5, 2008
| House Financial Services Committee Chairman Barney Frank (D-MA) cleared his “rescue plan” legislation through committee this past week. This bill is expected to be the vehicle through which an even larger housing/tax package will be considered by the House this week, possibly including even another attempt to push FHA Modernization and GSE Regulatory Reform over the finish line.With a relatively short time frame for Congress to complete their work in this election year, this week’s action in the House may mark the beginning of the end game for a 2008 legislative response to the problems in the mortgage and credit markets.
At MBA’s Legal Issues & Regulatory Compliance Conference, industry leaders met to discuss pressing legal and policy challenges. While conference participants agreed that our industry is experiencing profound change and a highly uncertain future, there was tremendous confidence that we are up to the task. Each time our industry has faced extraordinary turmoil, we have emerged stronger. MBA shares this point of view.Â
House Financial Services Committee Passes Borrower “Rescue” Bill
On Thursday, May 1, the House Financial Services Committee reported Chairman Barney Frank’s (D-MA) borrower rescue proposal to the House floor by a vote of 46-21. The “FHA Housing and Homeownership Retention Act” (H.R. 5830) would enable the Federal Housing Administration (FHA) to provide up to $300 billion in new guarantees to refinance loans for borrowers facing foreclosure. The Committee had previously passed “The Neighborhood Stabilization Act” (H.R. 5818), introduced by Subcommittee on Housing and Community Opportunity Chairwoman Maxine Waters (D-CA), which would allocate HUD-administered loans and grants to states and cities to purchase and revitalize owner-vacated, foreclosed homes. Both bills, as well as a housing tax bill, are expected to come to the House floor the week of May 5th.
Senate Subcommittee Examines Subprime Consumer Protections
On Tuesday, April 29, the Senate Commerce, Science and Transportation Committee’s Subcommittee on Interstate Commerce, Trade and Tourism held a hearing entitled “Improving Consumer Protections in Subprime Lending.” Subcommittee Chairman Byron Dorgan (D-ND) called the hearing to examine practices of subprime lenders and the Federal Trade Commission’s (FTC) authority to protect consumers from unfair and deceptive lending practices.  Chairman Dorgan has introduced S. 2831, the “Federal Trade Commission Reauthorization Act of 2008,” which would give the FTC additional authority to conduct rulemaking on subprime and nontraditional mortgages of non-bank institutions, among other things. MBA sent a statement for the record to Chairman Dorgan and Ranking Member Jim DeMint (R-SC) outlining MBA’s concerns.Â
In related news, on Thursday, May 1, the Senate Banking Committee held a hearing regarding the financial literacy of homebuyers in an effort to determine whether new rules on borrower education would be beneficial to consumers.Â
Thursday, May 6, the Senate Judiciary Subcommittee on Administrative Oversight in the Courts will hold a hearing on mortgage servicing misconduct and bankruptcy. MBA believes the focus of this hearing will be mortgage lender collection efforts after a borrower declares bankruptcy.
MBA Submits Comments on GSE-OFHEO-Cuomo Appraisal Agreement
On Wednesday, April 30, MBA submitted comments to Fannie Mae, Freddie Mac and the Officer of Federal Housing Enterprise Oversight (OFHEO) regarding the Appraiser Code of Conduct and Agreements signed by the GSEs, OFHEO and the New York Attorney General Andrew Cuomo. MBA recommends that the agreements and the code of conduct be withdrawn for violation of the Administrative Procedures Act, among other reasons. If not withdrawn, MBA asks that they be modified to address concerns MBA has about safety and soundness, procedural complications and operational issues that will likely result in increased costs for lenders and consumers.Â
Additionally, MBA, the American Bankers Association, Independent Community Bankers Association, Housing Policy Council of the Financial Services Roundtable and the Consumer Mortgage Coalition have signed a separate comment letter for submission to OFHEO regarding the appraisal agreement. The joint trade letter emphasizes procedural and legal flaws associated with the Agreement and Code.Â
Lastly, the Office of Thrift Supervision (OTS) also submitted a comment letter echoing MBA’s objections to the Agreements and Code. In its letter, OTS disagreed with the NY AG’s premise that corporate structure and ownership considerations alone would dictate whether an appraisal was prepared with proper independence. OTS’ opposition to the Agreements is key not only because they are the supervisory agency of institutions subject to the Agreements, but also because they are an agency within the Treasury Department and they were allegedly consulted during the OFHEO, NY AG and GSE negotiations that culminated in the Agreements. The Office of the Comptroller of the Currency and Federal Reserve are expected to weigh in against the Agreements too.
HOPE NOW Servicers Provide Nearly 503,000 Loan Workouts in 1Q 2008
On Monday, April 28, HOPE NOW announced that its mortgage servicers have helped more than half a million homeowners stay in their homes during the first quarter of 2008 by providing loan workouts. Since July 2007, servicers provided loan workouts for nearly 1.4 million homeowners. Additionally, during the first quarter of 2008, loan modifications represented double the 2007 rate of all subprime loan workouts at 44 percent.Â
FDIC Unveils Mortgage Rescue Plan
This week, Sheila Bair, Chairwoman of the Federal Deposit Insurance Corporation (FDIC), announced a new proposal to help homeowners whose mortgage balance is higher than the market value of their property. The proposal asks Congress to pass legislation (not yet drafted) to authorize the Department of the Treasury to provide loans to help eligible borrowers. This plan would allow the Department of the Treasury to make “Home Ownership Preservation” or HOP loans, funded through a public debt offering of $50 billion, to pay down up to 20 percent of the principal owed on eligible mortgages. The remaining outstanding principal of the eligible mortgage would be given a priority interest - not subordination - to the Treasury Department, and it would be “restructured” into a fully amortizing, fixed-rate loan that would be more affordable for the borrower.Â
MBA Joins Broad Coalition Calling for Addition of LIHTC to Senate’s Housing Stimulus Proposal
MBA added its support this week to a letter by a diverse coalition of state and local government, housing, and community organizations which urged members of the Senate to cosponsor S. 2666, the Affordable Housing Investment Act of 2008. The bill was introduced by Senator Maria Cantwell (D-WA) and Senator Gordon Smith (R-OR), and would significantly strengthen the Low Income Housing Tax Credit (LIHTC) program. The House Ways and Means Committee recently reported similar legislation, H.R. 5720, the Housing Assistance Tax Act of 2008, on a bipartisan basis.
House Veterans’ Committee Acts on Veterans’ Legislation
On Wednesday, April 30, the House Veterans’ Affairs (VA) Committee reported two bills regarding veterans’ benefits, H.R. 4883 and H.R. 4884. H.R. 4883 amends the Servicemembers’ Civil Relief Act to provide for a limitation on the sale, foreclosure or seizure of property owned by a servicemember during the one-year period following the servicemember’s period of military service. Provisions of H.R. 4884, the “Helping Our Veterans Keep Their Homes Act of 2008,” include: an increase in the maximum VA Home Loan Guaranty amount from 25 percent to 150 percent of the Freddie Mac conforming loan limit; provides for an annual inflation increase in the guarantee; and extends the VA adjustable rate mortgage (ARM) and Hybrid ARM programs through fiscal year 2012.
MBA Joins Housing Trade Associations to Support Section 8 Project-Based Program Funding
On Thursday, May 1, MBA, as part of a real estate coalition, sent a letter to House Appropriations Committee, Subcommittee on Transportation, HUD and Related Agencies Chairman John Olver (D-MA), urging the Subcommittee to support additional funding for the Section 8 project-based program. During the last decade funding for housing assistance payment contracts (HAPs) have been consistently underestimated, resulting in the absence of contracted payments to project owners. For these reasons, the housing trade associations recommend the inclusion of a $2.8 billion one-time appropriation in a supplemental spending bill to ensure that annual renewals receive reliable 12 months of funding.
MBA Holds Successful Legal Issues and Regulatory Compliance Conference
This week over 500 lawyers and industry leaders attended MBA’s Annual Legal Issues and Regulatory Compliance Conference in Carlsbad, CA. The conference covered current and emerging legal and regulatory trends affecting the mortgage industry, as well as high-demand regulatory reform issues, such as RESPA and TILA. Featured General Session speakers included Department of Housing and Urban Development (HUD) General Counsel Robert Couch, CMB, and Office of Federal Housing and Enterprise Oversight (OFHEO) General Counsel Alfred Pollard. Also, Iowa Attorney General Tom Miller and Conference of State Bank Supervisors Executive Vice President John Ryan participated in a conversation with state regulators. Additionally, Center for Responsible Lending President Michael Calhoun and National Community Reinvestment Coalition Executive Vice-President David Berenbaum participated at the conference and discussed the future direction of the industry. |
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May 5th, 2008
Last Week in the News
The Commerce Department got the month off to a good start when it reported on May 1 that consumer spending in March was up 0.4%, double the increase that economists had predicted. Consumer spending, which accounts for 70% of U.S. economic activity, is vital to the nation’s long-term economic health.
Further economic stimulus came from the Federal Reserve, which announced on April 30 that it was pushing down the federal funds rate — the rate at which banks lend money to one another — to 2%, the lowest level since late 2004. The reduction marked the seventh rate cut by the central bank since it began easing credit conditions last September. On the heels of the Fed’s action, many commercial banks announced they were cutting their prime lending rate to 5%.
The Commerce Department also reported on April 30 that the gross domestic product — the sum of all goods and services produced in the United States — expanded at a 0.6% annual pace in the first quarter. The gain, which matched the rate of the previous three months, was better than forecast.
Job losses slowed in April, with the Labor Department reporting May 2 that employers shed 20,000 jobs from their payrolls, far fewer than the 75,000 cuts that economists were anticipating. The unemployment rate also fell from 5.1% in March to 5% in April, again surprising economists who had expected unemployment to climb to 5.2%.
Also on Friday, the Commerce Department reported that factory orders in March rose 1.4%, far better than the 0.2% rise analysts had forecast. The rebound followed a 0.9% dip in February and a 2.3% drop in January.
Economic news due out this week includes reports on workforce productivity on May 7 and the U.S. trade balance on May 9.
Economic data compiled from government reports and news services Bloomberg.com, msnbc.com, cnbc.com, cnn.money.com and Yahoo Economic Calendar
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April 28th, 2008
Consumer confidence fell to a 25-year low, according to the Reuters/University of Michigan consumer sentiment index, dropping from 69.5 in March to 62.6 in April. The reading is troubling because it’s regarded as an indicator of future consumer spending, which accounts for about 70% of U.S. economic activity.
Sales of existing homes dropped 2% in March to an annual rate of 4.93 million units, the National Association of REALTORS® reported April 22. The median price of an existing home tumbled 7.7% from a year ago to $200,700, the second biggest decline since a record 8.4% drop in February.
Sales of new homes plunged 8.5% in March to an annual rate of 526,000 units, the slowest sales pace since October 1991, the Commerce Department said April 24. The median price of a new home dropped 13.3% from a year ago to $227,600, the biggest year-over-year price decline since a 14.6% plunge 38 years ago. At the current sales pace, it would take 11 months to deplete the national inventory of new homes.
Homebuyers didn’t get much mortgage rate relief as 30-year and 15-year fixed-rate loans edged up for the week ending April 24, Freddie Mac said in its weekly survey of mortgage lenders.
The demand for durable goods — big-ticket items expected to last three or more years — dipped 0.3% in March, a worse-than-expected showing, the Commerce Department said April 24. The last time orders fell for three consecutive months was from February to April of 2001, when the nation was sliding into the last recession.
The job front was a bit rosier, however, as new claims for unemployment benefits fell by 33,000 last week to 342,000, the Labor Department reported April 24. Economists had expected a rise of 3,000.
Economic news due this week includes another consumer confidence report on April 29 and a preliminary report on the nation’s first-quarter gross domestic product on April 30.
Economic data compiled from government reports and news services Bloomberg.com, msnbc.com, cnbc.com, cnn.money.com and Yahoo Economic Calendar.
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April 23rd, 2008
| Once again, housing issues were center stage in Washington, D.C. last week.On Friday, President Bush announced the nomination of Steve Preston as Secretary of HUD. Currently, Mr. Preston serves as Administrator of the Small Business Administration. If confirmed, Mr. Preston will succeed Alphonso Jackson who is stepping down effective last Friday.
The announcement of a new HUD Secretary is important news. As the White House continues to search for ways to solve the housing crisis, new leadership at HUD provides an opportunity to jumpstart key efforts and explore new options. MBA will continue to focus on FHA modernization as a top priority as the new Secretary takes over. Â
Last week MBA had a significant presence on Capitol Hill as our National Policy Conference brought mortgage bankers from across the nation to meet with lawmakers. MBA members met with over 175 congressional offices, making our case on ways to stabilize the market, help borrowers stay in their homes, and prevent future problems in the market.
In the midst of our conference, MBA also testified twice last week in Congress. MBA Chairman-Elect David Kittle, CMB, and MBA’s Vice Chairman, Rob Story, Jr., CMB, both appeared on Capitol Hill to speak on mortgage servicing issues relating to the current credit crisis.
This week will be yet another busy week, as we prepare for a markup of Chairman Frank’s FHA “rescue” legislation, and expect two Senate Banking Committee hearings on turmoil in the credit markets.
President Bush Nominates Steve Preston as HUD Secretary
On Friday, April 18, President Bush announced his nomination of U.S. Small Business Administration (SBA) Administrator Steve Preston to be Housing and Urban Development (HUD) Secretary. Mr. Preston was sworn in as SBA Administrator in July 2006, after unanimous approval by the Senate. Prior to his current position, Mr. Preston was Executive Vice President at the ServiceMaster Company and Treasurer at First Data Corporation. According to the White House, Mr. Preston’s track record in the private sector, as well as accomplishments made during his tenure as Administrator for SBA, have demonstrated deep financial and capital markets knowledge necessary to act aggressively to help struggling homeowners keep their homes. Mr. Preston has vowed to lead HUD in its mission to support homeownership by working with Congress to advance legislation that works towards this end.Â
House Financial Services Committee Introduces Housing Legislation
On Thursday, April 17, Members of the House Financial Services Committee introduced legislation to address the housing market. The legislation combines two bills, H.R. 5830, the “FHA Housing and Homeownership Retention Act” and H.R. 5818, the “Neighborhood Stabilization Act of 2008.” The former, which was originally introduced by Chairman Frank in March, would enable the Federal Housing Administration (FHA) to provide up to $300 billion in new guarantees to refinance loans for borrowers facing foreclosure. The bill calls on lenders to voluntarily write down the principal balance of loans. The Neighborhood Stabilization Act that was originally introduced by Subcommittee on Housing and Community Opportunity Chairwoman Maxine Waters (D-CA) will allocate HUD-administered loans and grants to states and cities to purchase and revitalize owner-vacated, foreclosed homes. The full committee is expected to hold a markup session and vote on the two measures Wednesday, April 23, at 10:00 a.m. and Thursday, April 24.
MBA Releases FHA Modernization Side-by-Side
On Friday, April 18, MBA released an updated FHA modernization bill side-by-side, comparing provisions of H.R. 1852, which passed the full House in September; S. 2338, which passed the Senate in December; and H.R. 3221, an amendment that the Senate passed on April 10 as part of the Foreclosure Prevention Act of 2008.Â
MBA Testifies on Mortgage Servicing Issues
On Tuesday, April 15, MBA Vice Chairman Rob Story, Jr., CMB, testified before the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises hearing on Chairman Paul Kanjorski’s (D-PA) and Representative Mike Castle’s (R-DE) bill, the “Emergency Home Loan Modification Act.” This bill would provide a servicer a safe harbor from certain legal liabilities if the servicer engages in loss mitigation procedures. While MBA appreciates efforts to reduce contractual and fiduciary risks servicers face providing the full range of loss mitigation options, MBA remains concerned that the alteration of contracts would impact future borrowers and liquidity in the marketplace. It is unclear whether benefits of H.R. 5579 outweigh the potential harm that the bill could cause the market during a time when stability and liquidity are essential for the secondary market.
On Wednesday, April 16, MBA Chairman-Elect David Kittle, CMB, testified before the House Subcommittee on Housing and Community Opportunity hearing on H.R. 5679, the “Foreclosure Prevention and Sound Mortgage Servicing Act of 2008,” which requires certain loss mitigation activities prior to foreclosure. Several problematic elements of the bill include a backdoor moratorium on foreclosures, rewriting mortgage terms, and enabling first mortgages to subsidize second mortgages and unsecured debt. MBA opposes this bill, as it would increase mortgage rates, reduce availability of credit, and deter investor interest in mortgage securities.     Â
OFHEO Signs Consent Orders with Former Fannie Mae Executives
On Friday, April 18, the Office of Federal Housing Enterprise Oversight (OFHEO) reached an agreement with former Fannie Mae CEO Frank Raines, former CFO Tim Howard and former Controller Leanne Spencer in the form of Consent Orders regarding accounting and internal control problems. According to OFHEO, the alleged charges, filed in December 2006, included “inappropriate earnings management” and the release of misleading financial reports.  Combined, the three consent orders provide $31 million in penalties and loss of benefits.
2008 National Policy Conference Recap
MBA members took the industry’s message to Capitol Hill last week during the National Policy Conference in Washington, D.C. Over 150 members gathered to be briefed on the legislative outlook and hear two leaders on real estate finance issues in the House, Representative Jeb Hensarling (R-TX) and Representative Brad Miller (D-NC), discuss their views on the situation in the housing market.
Attendees also took MBA’s message directly to lawmakers in over 175 separate visits to House and Senate offices, including House Speaker Nancy Pelosi (D-CA), Senate Banking Committee Ranking Member Richard Shelby (R-AL), Majority Leaders Harry Reid (D-NV) and Steny Hoyer (D-MD), Minority Leader John Boehner (R-OH), and House Financial Services Chairman Barney Frank (D-MA) and Ranking Member Spencer Bachus (R-AL). Association members discussed with legislators ways to help stabilize the market, assist distressed borrowers and renters, and prevent future problems. Please see the attached documents to view MBA’s Agenda to Stabilize the Housing Market and an update on the Commercial and Multifamily mortgage market, which were distributed to Congress.
For more information, please contact Adam Fromm at (202) 557-2858 (afromm@mortgagebankers.org).
Freddie Mac to Buy Billions in “Conforming Jumbo” Loans
On Thursday, April 17, Freddie Mac announced plans to buy billions in so-called “conforming jumbo” loans for its portfolio from Wells Fargo, Chase, CitiMortgage and Washington Mutual. Freddie Mac estimates this will support the financing of $10-$15 billion in new jumbo mortgages in 2008. Restrictions include a 90 percent loan-to-value (LTV) and $100,000 maximum cash out for refinancings. This marks the first publicized large-scale effort to jumpstart the stalled jumbo mortgage market under the Economic Stimulus Act.
In related news, on April 17, Fannie Mae announced that it has 90-day commitments for conforming jumbo whole loans and mortgage-backed securities (MBS). Fannie Mae has been providing conforming jumbo whole loan pricing since April 1.
Another Important Appeals Court Victory in Firm Offer of Credit Case
This week, in a “firm offer of credit” decision under the Fair Credit Reporting Act (FCRA) the 7th U.S. Circuit Court of Appeals affirmed the district’s court’s judgment for the creditor in Bruce v. Keybank. The Court held that the value of a creditor’s offer is not relevant for purposes of the “firm offer” provision but whether it is “firm.” In that connection, the Court rejected the argument that pre-screened mailers must contain all material terms. The court held that the question posed by the law is whether the offer will be “honored” (if verification of the consumer and collateral checks out) not whether all the terms appear in the initial mailing.  MBA and other industry groups filed an amicus brief supporting Keybank’s position with the Court.Â
FHFB Allows FHLBs to Use Affordable Housing Program for Subprime Refinancing
As reported last week, on Wednesday, April 16, the Federal Housing Finance Board published a proposed rule in the Federal Register to temporarily allow the Federal Home Loan Banks (FHLBs) to use Affordable Housing Program (AFH) funds to subsidize the refinancing or restructuring of low- or moderate-income households’ subprime or nontraditional mortgages held by FHLB members or their affiliates. The Finance Board estimates that if the FHLBs were to use the maximum proposed refinancing AHP set-aside authority in 2008, they could provide almost $75 million to assist some 7,500 households facing possible loss of their homes (assuming an average subsidy of $10,000 per household). The new authority will expire on June 30, 2011. MBA will submit comments before the June 16, 2008 deadline for public comment.
MBA Participates in National Governors Association Webcast
On Wednesday, April 16, MBA Vice President of Legislative Affairs Francis Creighton participated in a webcast sponsored by the National Governors Association (NGA) on the topic of “Federal Policy to Address Foreclosures: What States Need to Know.” This webcast demonstrated the interest and activity of state officials seeking ways to address mortgage related policy issues in the absence of federal actions. The discussion focused on current market conditions, outlook for Congressional and Administrative actions, and the potential impact on states. Mr. Creighton discussed MBA’s support for action at both the federal and state levels that will stabilize the market, provide assistance to borrowers, and prevent future problems in the mortgage market. To view the full webcast, click here.Â
Additionally, on May 28-29, MBA Chairman Kieran Quinn, CMB, will participate in a NGA-sponsored State Summit on Foreclosures and Housing Solutions in Arlington, Virginia. Mr. Quinn will participate on a panel that will focus on policies to prevent future foreclosures.
MBA Submits Letter to NY Banking Superintendent on Proposed Legislation
On Tuesday, April 15, MBA Vice President of State Legislative Affairs Paul Richman submitted a comment letter to New York Banking Superintendent Richard Neiman on proposed subprime and foreclosure legislation. The legislation consists of comprehensive reforms aimed to temper foreclosures and tighten lending practices in New York, including the addition of process requirements for borrowers; new requirements on mortgage servicers; and new obligations on mortgage servicers who seek to enforce their legal rights as holders of a mortgage in the instance of default. Additionally, the legislation would expand existing protections and establish new standards governing lending practices. MBA expressed concern over the availability and additional costs of mortgages that would ensue should the legislation be enacted. Moreover, MBA requested an opportunity to meet with Superintendent Neiman to discuss ways to modify harmful provisions of the legislation.Â
Baucus and Grassley Unveil Tax Bill
On Thursday, April 18, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) unveiled comprehensive tax legislation dealing with a large variety of issues.  The bill includes some program extenders supported by MBA, including a 15-year recovery period for leasehold improvements through 2009, as well as the expensing of “brownfields” environmental remediation osts through 2009, both of which expired in December 2007. The bill has not yet been reported out by the Committee.  |
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April 14th, 2008
Dragged down by worries about mounting job losses, record-high foreclosures and zooming energy prices, U.S. consumer confidence in April fell to its lowest point in more than a quarter century. According to the Reuters/University of Michigan Surveys of Consumers index released April 11, confidence dropped from 69.5 in March to 63.2 in April, well below economists’ expectation of a 69.0 reading.
On the housing front, the National Association of REALTORS® reported on April 8 that its index of pending U.S. home sales fell from 86.2 in January to 84.6 in February, its lowest reading since the index began in 2001. Analysts had expected the index to inch up to 86.3.
The U.S. trade deficit unexpectedly expanded by 5.7% in February to $62.3 billion, the Commerce Department said April 10. The growing deficit surprised economists who had forecast a decline, believing that the economic slowdown in the United States would curb demand for imports.
Retail sales slid 0.5% in March, the weakest performance in 13 years, the UBS-International Council of Shopping Centers said April 10. Discounters Wal-Mart Stores (up 0.7%) and Costco Wholesale Corp (up 7%) countered the negative trend, attracting value-driven shoppers who limited their purchases to food and other essentials.
A sluggish jobs report added to economic concerns. Although the Labor Department reported on April 10 that applications for unemployment benefits decreased by 53,000 from the previous week, the four-week average for claims increased by 2,500 to 378,250, the highest level since October 2005.
Interest rates on 30-year and 15-year fixed-rate mortgages remained unchanged for the week ending April 10, Freddie Mac reported.
Economic news due out this week includes inflation reports on the Producer Price Index on April 15 and the Consumer Price Index on April 16.
Economic data compiled from government reports and news services Bloomberg.com, msnbc.com, cnbc.com, cnn.money.com and Yahoo Economic Calendar.
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April 9th, 2008
Volume III | Issue 13 | April 7, 2008
| With Congress back in session, it has been another intense week for our industry in Washington. The week began with the release of a long-anticipated proposal from the U.S. Department of Treasury to comprehensively reform the U.S. system of regulating financial institutions, including all mortgage originators. Then, against a backdrop of continued bad economic news this week, the U.S. Senate held two hearings on conditions in the credit markets and took up a reform and stimulus package on the Senate floor that will have significant implications for the mortgage industry. Previously, Senate Democrats tried to bring up a bill to spur the housing markets and failed to advance it due to the strong objections of MAA and others to the inclusion of bankruptcy loan principal “cramdown” provisions. This time, the package is different. The Senate Majority and Minority Leaders reached agreement to bring a bipartisan bill, to be crafted by the Chairman and the Ranking Member of the Banking Committee, to the floor. On Thursday, debate began on a package with sweeping ramifications, most of them positive, for our industry. The speed at which this legislation is moving in the Senate is rare and the speed at which the initial agreements were reached is indicative of the focus of Congress on our industry’s issues. While MAA supports the Senate bill and some of the proposed amendments, it is important to understand the extremely fluid nature of the political risk and legislative and regulatory activity aimed at the housing crisis, mortgage originators and the credit markets at this time. Â
To add to the events in Washington this week, state governments are acting increasingly aggressively on remedies at their level. Ohio, Illinois, Maryland and Minnesota were hotspots for activity this week, with Maryland actually enacting emergency legislation related to foreclosures that took effect on Thursday.Â
Senate Begins Work on Housing Stimulus Package
This week, the Senate reached agreement on a wide-ranging plan to address the crisis in the housing market. On Tuesday, Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) agreed to proceed to substitute a package drafted by Banking Committee Chairman Christopher Dodd (D-CT) and Ranking Member Richard Shelby (R-AL). The Senate began debate on the bipartisan package Wednesday evening; the package contains the following provisions:
· FHA Modernization
· Community Development Block Grant Funding
· Foreclosure Prevention Counseling Funding
· Veterans Foreclosure Assistance
· Property Tax Deduction for non-itemized filers
· Increase in the Mortgage Revenue Bond Cap and flexibility to fund refinance loans for housing finance agencies
· Net Operating Loss Carryback
· Tax Credit for Home Purchases
· Improved Disclosure under TILA
The most contentious provision of the original housing package, Senator Durbin’s (D-IL) bankruptcy reform provision, which would unilaterally give bankruptcy judges the ability to modify the terms of a loan, including principal, interest rate and term, was not included in the bipartisan package. On Thursday, Senator Durbin offered this provision as an amendment but was met with strong opposition from Republicans. After more than six hours of debate, the amendment was tabled by a vote of 58-36, with 11 Democrats voting to move forward to other amendments. There will be numerous housing and tax related amendments offered over the next few days as the Senate continues to debate the housing package. MAA has been actively engaged on Capitol Hill this week, and will continue to work with Senators and their staff. We expect a final vote on the entire package by the middle of next week.
Although Senate passage of the housing package will be a positive, significant step for troubled borrowers and the industry, the package must be conferenced with any future version passed by the House of Representatives before it is signed into law. At this point, it is unclear which provisions will be included in a House package. It should be noted that the new Senate package would require a downpayment of 3.5 percent for FHA loans, while the House passed FHA bill allows for lower downpayment requirements, highlighting differences that still need reconciliation. We will keep MAA members abreast of the debate as the packages move through the legislative process.Â
In advance of the debate, on Monday, March 31, MBA, as part of a united industry coalition, sent a letter to Members of the Senate reiterating strong opposition to mortgage bankruptcy provisions that have been included in Title IV of the Foreclosure Prevention Act of 2008, the Substitute to H.R. 3221.Â
Congressional Hearings Planned in April: MBA Chairman-Elect to Testify
On Monday, April 7, the Senate Banking Committee will hold a hearing in Philadelphia to discuss solutions to predatory lending and foreclosure. On Thursday, April 10, the full Committee will hold a hearing entitled, “Turmoil in U.S. Credit Markets: Examining Proposals to Mitigate Foreclosures and Restore Liquidity to the Mortgage Markets.”
On Thursday, April 10 the Senate Appropriations Subcommittee on Transportation and Housing and Urban Development is expected to hear testimony from MBA Chairman-Elect David Kittle, CMB, on FHA modernization.Â
The House Financial Services Committee will discuss Chairman Barney Frank’s (D-MA) bill, the “FHA Housing Stabilization and Homeownership Retention Act,” in hearings scheduled for April 9-10. The Subcommittee is also expected to examine Representative Castle’s (R-DE) and Representative Kanjorski’s (D-PA) servicer liability bill on April 15. Additionally, on April 24, the full committee is expected to hold a hearing on property preservation.Â
Treasury Releases Blueprint for Modernizing the U.S. Financial Structure
On Monday, March 31, the Treasury Department released, “Blueprint for a Modernized Financial Regulatory Structure.” The report aims to evaluate whether the competitive nature of our nation’s financial services sector is constrained by an outdated financial regulatory framework. MBA submitted comments to Treasury during its deliberations last year. In the upcoming days, we will closely evaluate the report, as well as Treasury Secretary Paulson’s recommendations based on its findings, and work closely with our member companies to establish policy related to these recommendations. To view the full report click here.
HUD Secretary Alphonso Jackson Resigns
On Monday, March 31, the Department of Housing and Urban Development (HUD) Secretary Alphonso Jackson resigned effective April 18, 2008. Mr. Jackson, the second HUD Secretary of the Bush Administration, was the subject of letters from Democratic lawmakers to the President calling for his resignation in light of a series of accusations made against Mr. Jackson in recent weeks.Â
In the wake of this news, it is important to note that MBA retains a very strong relationship with HUD leadership including HUD Deputy Secretary Roy Bernardi, who addressed MBA’s National Policy Conference last year, as well as with FHA Commissioner Brian Montgomery, who will participate in MBA’s Secondary and Capital Markets Conference in May. MBA is currently developing comments on HUD’s proposed RESPA rule, and holds bi-monthly conference calls with lead FHA single family staff and MBA members on the implementation of FHASecure and other issues. In this time of transition, MBA will continue to work with HUD without interruption.
FinCEN Releases Mortgage Fraud Report
On Thursday, April 3, the Financial Crimes Enforcement Network (FinCEN) released an update to its November 2006 mortgage loan fraud assessment, which is based upon analysis of suspicious activity reports (SARs). The previous study looked at mortgage fraud filings between April 1996 and March 2006. This updated study continues the analysis for reports filed through March 2007. The assessment found a 50 percent increase in the number of SARs that reported intercepting fraud prior to funding a mortgage, largely due to efforts made by our members in combating fraud earlier in the process; and that identity fraud and identity theft associated with mortgage fraud increased over 95 percent from the previous study. To view the full report click here.
MBA Supports the Business Activity Tax Simplification Act
On Wednesday, April 2, MBA, as part of a united industry coalition, sent a letter to House Judiciary Committee Chairman John Conyers, Jr. (D-MI) and House Subcommittee on Commercial and Administrative Law Chairwoman Linda Sanchez (D-CA) expressing strong support for H.R. 5267, the Business Activity Tax Simplification Act of 2008 (BATSA). This bill would clarify the constitutional requirement for a physical presence nexus standard governing state assessment of corporate income taxes and comparable taxes on a business. This provision will, in turn, minimize litigation costs for both state governments and taxpayers, creating legal certainty and promoting a stable business environment that encourages businesses to make investments.  Â
In related news, House Small Business Committee Chairwoman Nydia Velazquez (D- NY) and Ranking Member Steve Chabot (R-OH) wrote a letter to Chairman Conyers expressing support for H.R. 5267.
HUD Announces Credit Overlays for FHA Jumbo Conforming Loans
As reported last week, on Tuesday, April 1, HUD released a mortgagee letter that put additional credit overlays for loans above $417,000. Specifically, FHA requires a second appraisal for all jumbo conforming loans where the LTV ratio equals or exceeds 95 percent and where the property is in a declining market. They also limit cash-out refinances for jumbo loans at 85 percent of appraiser’s estimate of value. Â These credit policy changes came into effective upon Tuesday’s release of the mortgagee letter.
Consumer Advocacy Groups Oppose Provisions of Foreclosure Prevention Act
On Wednesday, April 3, a group of consumer advocates sent a letter to Senate Banking Committee Chairman Christopher Dodd (D-CT) and Ranking Member Richard Shelby (R-AL) expressing opposition to the removal of current net worth, liquid assets and the audited financial statement requirements for non-supervised mortgagees that wish to participate in FHA loan programs. This position is in line with MBA’s advocacy goal of ensuring adequate regulation of all players in the mortgage industry.
Maryland Enacts Sweeping Mortgage Reform Legislation
On Thursday, April 3, Maryland Governor Martin O’Malley signed a sweeping mortgage reform package into law that addresses loan origination, foreclosure, mortgage fraud, and foreclosure rescue transactions. The bills represent the result of significant negotiation between the O’Malley administration, legislators, lending trade groups, and community advocates. MBA believes that the bill package strikes a careful balance that will likely ensure the continued availability of credit in the State. It strengthens lending practice standards (H.B. 363/ S. 270), increases protections for consumers from foreclosure rescue scams (H.B. 361/ S. 218) and provides the means necessary for state law enforcement officials to prosecute mortgage fraud as a crime (H.B. 360/ S. 217). The General Assembly deemed three of the four bills “emergency” measures, by making them effective immediately upon the Governor’s signature.
Most significantly, one of the emergency bills (H.B. 365/S.B. 216) reforms the foreclosure process by providing for increased notification requirements and extends the time from the commencement of foreclosure to conclusion. Prior to the bill’s enactment, the minimum foreclosure timeline in Maryland from commencement to sale was 46 days. Among its various provisions, the new law requires lenders to wait 90 days from default before filing foreclosure and will require lenders to send the borrower a uniform Notice of Intent to Foreclose 45 days prior to filing the foreclosure action.Â
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MBA National Policy Conference in Washington, DC, April 16-17
MBA continues to urge Association members to participate in the 2008 National Policy Conference on April 16-17, to speak to Members of Congress about issues that directly affect our business. As our industry faces unprecedented challenges, it is vital that you engage with policymakers to ensure that your voice is heard. Only your personal commitment and involvement will help to make a difference. There has never been a more important time for industry leaders to participate in the Association’s annual opportunity to personally carry our message to Capitol Hill.
Please visit the National Policy Conference Web site to register, where you can also listen to an important message from MBA Chairman Kieran Quinn, CMB.
For more information, please contact Adam Fromm at (202) 557-2858 (afromm@mortgagebankers.org). |
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April 2nd, 2008
The Senate has been working on a bipartisan approach to quickly pass a housing stimulus package. While details of the final plan are not yet available, we understand that the package may include several key MAA-supported initiatives. We anticipate Senate Majority Leader Harry Reid (D-NV) will shortly announce an agreement with the following provisions: · Modernizing the FHA according to previously passed Senate legislation, but permanently increasing the FHA loan limit to $550,000 with a 3.5 percent downpayment requirement; · Increasing the mortgage revenue bond cap by $10 billion to allow state housing finance agencies to refinance subprime loans, provide mortgages for first-time homebuyers, and for multifamily rental housing; · Purchasers of a home upon which foreclosure proceedings had begun would qualify for a $7,000 non-refundable tax credit on spread over two years that would not be available to newly-built homes; · $100 million in additional funding for housing counseling services; · Language to allow businesses to carryback net operating losses over a longer period of time - 4 years instead of 2 - so they may claim refunds of taxes paid in earlier years (we are unclear as of this writing the tax years to which this would apply). MAA and its industry allies are actively working to keep the bipartisan agreement focused, and free of any amendments that would stall progress. Specifically, we are working together to defeat any amendment that may be offered related to changes in the bankruptcy laws. We expect the Senate to begin debate of this package tonight, but not conclude consideration until next week. We will provide further updates as details become available. Adam Adam Fromm Mortgage Action Alliance www.mortgageactionalliance.org Phone: (202) 557-2858 AFromm@mortgagebankers.org
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March 29th, 2008
Bankruptcy “Cramdown” Legislation Is Back in the SenateThe Mortgage Action Alliance expects that upon its return from recess next week, the U.S. Senate will again consider S. 2636, the Foreclosure Prevention Act of 2008. Last month, the Senate fell 12 votes short and we anticipate a close vote again most likely on Tuesday.
Please click here to contact your Senators and express your opposition to S. 2636.
If you are new to the Mortgage Action Alliance, please click here and enroll for the Alliance first. Once you enroll, you’ll receive weekly updates on policy issues that affect your business and specific information when major legislation related to the real estate finance industry is debated in Washington, DC.
Please click here to contact your Senators and express your opposition to S. 2636.
If you have questions, please contact Adam Fromm at afromm@mortgagebankers.org or (202) 557-2858.
Please forward this e-mail to your real estate finance industry colleagues to keep them updated on this vital issue.
For more information on other issues that affect you, your company and the real estate finance industry, please click here.
The Mortgage Action Alliance (MAA) is the premier grassroots lobbying organization of the real estate finance industry. The mission of the Mortgage Action Alliance is to further build a network of individuals dedicated to strengthening the industry’s voice and lobbying power in Washington, DC and state capitals.
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March 26th, 2008
Volume III | Issue 11 | March 24, 2008
| Last week started with an extraordinary chain of events in the financial markets, the implications of which will be debated for years. On Sunday evening, shortly before the Asian markets opened, it was announced that JPMorgan Chase, with backing from the Federal Reserve, was buying Bear Stearns. Additionally, the Fed announced that it was making the discount window available to investment banks on terms similar to those for regular members of the system. Both moves were efforts to avert a systemic crisis in the credit markets.On Tuesday, the Fed’s Open Market Committee announced a 75 basis point reduction in the federal funds target rate. On Wednesday, OFHEO agreed to lower the capital surcharge on Fannie Mae and Freddie Mac by 10 percent - a move intended to provide a liquidity injection of as much as $200 billion. Clearly, the events of late last week led policy-makers to pursue aggressive solutions.Â
While Congress is on recess, it has not stopped some, including House Financial Services Committee Chairman Barney Frank, from calling for a new financial regulatory regime. We expect lawmakers to focus on these issues when they return, with special attention paid to the mortgage relief ideas outlined by Chairman Frank and Senate Banking Committee Chairman Dodd at the end of last week. In the longer run, a vigorous policy debate is expected over regulators’ role in curtailing systemic risks in the financial system.
Market events this week will play a key role in setting the agenda in Congress for the next two months. A more stable market will likely mean an emphasis on ideas to help mortgage borrowers and get liquidity back into the system. Additional high-profile failures of financial institutions could shift the focus to the broader issues of financial market oversight and systemic risk. Either way, the mortgage industry will continue to take center stage.
Barney Frank Calls for Broader Regulations over Financial System
On Thursday, March 20, House Financial Services Committee Chairman Barney Frank called for tougher and broader regulations over financial systems following the purchase of Bear Stearns. Chairman Frank suggested either enabling the Federal Reserve Board (FRB) or establishing a new regulator to have systemic risk regulatory authority over major financial players. If adopted, this proposal could change the current financial regulatory structures of the Treasury Department, the FRB and the Securities and Exchange Commission. MBA will continue to watch this development closely.
OFHEO Announces GSE Liquidity Initiative
On Wednesday, March 19, the Office of Federal Housing Enterprise Oversight (OFHEO) announced plans to enable the government-sponsored enterprises (GSE) to use a portion of their regulatory capital surcharge to increase liquidity in the U.S. mortgage market. OFHEO expects the initiative to provide up to $200 billion of liquidity to the mortgage-backed securities (MBS) market. Additionally, OFHEO lowered the capital surcharge for GSEs to 20 percent, thereby freeing up additional funds for the GSEs to invest in MBS. OFHEO anticipates GSEs to purchase and guarantee $2 trillion in mortgages this year resulting from GSE’s existing capabilities combined with those invoked by the new initiative. The announcement also affirmed a renewed commitment to GSE oversight reform by both OFHEO and the GSEs. GSE oversight reform continues to be one of MBA’s top legislative priorities and we will continue to work with OFHEO, GSEs, Congress and the Administration to bring it to fruition this year.   Â
FDIC Continues to Warn Banks with CREs to Raise Capital
On Monday, March 17, the Federal Deposit Insurance Corporation (FDIC) issued a financial institution letter reiterating the need for banks to raise capital to cope with the increased risk associated with high concentrations of commercial real estate (CRE) and specifically, construction and development (C&D) loans. The FDIC made five key suggestions for institutions with significant C&D and CRE loans: increase and maintain strong capital levels; ensure that loan loss allowances are appropriately strong; manage C&D and CRE loan portfolios closely; maintain updated borrower financial and analytical information; and bolster the loan workout infrastructure.
The FDIC’s concerns were bolstered in part by statistics outlined in the agency’s Quarterly Banking Profile for the fourth quarter of 2007, released on Thursday, March 19. In the report, key performance indicators - including return on assets and the percentage of institutions reporting net losses - were at levels that have not been seen since the early 1990s. Moreover, loan loss provisions more than doubled in 2007 to $68.2 billion from $29.5 billion a year earlier. According to the FDIC, the rising trend in noncurrent loans indicates that losses will likely remain high for the near future. However, fewer than 90 institutions failed to meet the highest capital standard, a dramatic improvement compared to the nearly 2,000 institutions that were below this standard in 1991. Additionally, the FDIC’s “problem bank” list has 76 institutions, compared to 1,430 at the end of 1991.
Freddie Mac Calls for Comments on Appraisal Deal
On Friday, March 14, Freddie Mac called for comments from the mortgage industry on the implementation of the Home Valuation Code of Conduct that establishes new standards for appraisal selection, solicitation, compensation, conflicts of interest and independence. This Code is being adopted as part of the March 3 agreement between OFHEO, the GSEs and New York Attorney General Andrew Cuomo. Beginning January 1, 2009 Freddie Mac and Fannie Mae will only purchase mortgages from lenders adopting the new appraisal Code. MBA will submit comments before the April 30 deadline.  Â
MBA Opposes Fees in FY 2009 Budget Proposal
In letters sent on Friday, March 21, to both House and Senate Appropriations and Banking and Financial Services Committees, MBA expressed opposition to two components of the FY 2009 federal budget, which MBA believes will hurt homeowners and renters. MBA opposes the FY 2009 budget provision to subject Ginnie Mae’s administration expenses to the appropriations process and to set an initial cap on those expenses at $43 million. Capping the administration costs and specifically appropriating them could disrupt Ginnie Mae’s funding arrangements for meeting its obligations to provide mortgage lenders competitive prices for mortgages in the second market. A funding delay could impair Ginnie Mae’s ability to pool securities, in turn raising costs of credit when affordable housing finance products are in great demand. MBA also opposes raising the guarantee fee at the Department of Agriculture’s Rural Housing Service (RHS). MBA believes raising the Section 502 guarantee fee from two to three percent could significantly constrain the eligibility for the 502 program. MBA will continue to work with Congress on these issues.
Ginnie Mae Issues Supplementary Guidance on Stimulus Package Changes
Ginnie Mae issued additional guidance today clarifying the requirements for issuances of pools of high-balance loans eligible for FHA insurance as a result of the Economic Stimulus Act of 2008. The guidance supplements Ginnie Mae’s March 6 guidance describing pooling parameters for these loans. For example, today’s guidance expressly states that a TBA pool can include loans with a principal face amount of $362,790 plus the FHA mortgage insurance premiums. The guidance also indicates that low principal balance, fixed-rate government-insured or -guaranteed mortgages can also go into a loan pool designated as a high-balance loan pool (i.e., an MJM pool).Â
OCC Establishes Temporary Extension of LTOB Limit
On Thursday, March 20, in an attempt to provide additional liquidity to the financial markets, the Office of the Comptroller of the Currency (OCC) issued an interim final rule authorizing national banks to exceed the existing limit for extending loans to one borrower (LTOB). Effective immediately, the rule establishes a special temporary LTOB limit where the OCC determines that such loans are essential to address an emergency situation, such as critical financial markets stability.  OCC will grant approval to a higher loan limit so long as it is of short duration, has defined triggers for winding down the higher limit, and does not present unacceptable risk. The limit will also be subject to additional supervisory oversight and reporting measures. The OCC has requested comments and will revise the rule if necessary or appropriate in light of comments received before the April 21 deadline.
MBA Releases Position Paper on IRS WHFIT Regulations
This week, MBA released its position paper regarding identifying prepayment speeds to be used for reporting, or making available, information on sales of certain Ginnie Mae securities under new IRS regulations, Reporting for Widely Held Fixed Investment Trusts (WHFITs). As the designated trustees for loans backing the securities, the regulations apply to all approved issuers under Ginnie Mae’s programs.Â
This paper describes certain reasonable prepayment speed assumptions that issuers may use in reporting under the regulations. Please visit the MBA WHFIT Web page for additional information.
MBA Writes FRB Regarding HOEPA Proposal
On Monday, March 17, MBA wrote Federal Reserve Board Chairman Ben Bernanke to express appreciation for his comments before the National Community Reinvestment Coalition. The letter affirmed MBA’s accord with Chairman Bernanke’s position supporting strong reasonable standards coupled with greater transparency for consumers, which are essential for preserving the availability of credit and sustainable home ownership. The letter pointed out that the HOEPA proposals, while tough, were important steps in that direction, and that MBA will submit comments on the proposal by the April 8 deadline. Â
MBA Attends Maryland Governor’s Follow-Up Meeting with Servicers
On Thursday, Maryland Governor Martin O’Malley convened a follow-up meeting with loan servicers, GSEs, and MBA to discuss the current foreclosure situation, loss mitigation efforts, and ways to better connect borrowers with housing counselors. Servicers initially met with Governor O’Malley on February 26. Discussion during Thursday’s meeting focused on counselor training, loss mitigation timelines, and parameters for a foreclosure pause, or ‘cooling off period.’  The State also requested that servicers establish dedicated phone numbers and staff members with specific responsibility for Maryland issues. The Governor’s representatives indicated that they hope to establish an agreement with servicers that will address timelines for loss mitigation, a foreclosure pause, and capacity issues. MBA will be working with Maryland officials in the coming days to discuss feasible options, based on experiences in other states that have sought compacts with lenders this year. The State Secretary of Labor, Licensing and Regulation plans to issue an initial proposal to attendees within a week. Â
MBA National Policy Conference in Washington, DC, April 16-17
MBA continues to urge Association members to participate in the 2008 National Policy Conference on April 16-17, to speak to Members of Congress about issues that directly affect our business. As our industry faces unprecedented challenges, it is vital that you engage with policymakers to ensure that your voice is heard. Only your personal commitment and involvement will help to make a difference. There has never been a more important time for industry leaders to participate in the Association’s annual opportunity to personally carry our message to Capitol Hill.
Please visit the National Policy Conference Web site to register, where you can also listen to an important message from MBA Chairman Kieran Quinn, CMB. |
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