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Nation

NAR ANNOUNCES ENHANCED SUBPRIME LENDING POLICY,

On April 12, 2007, the Leadership Team approved NAR's Enhanced Subprime Lending Policy. The enhanced policy builds on the policy adopted by the Board of Directors in May 2005. The 2005 policy takes a 3-pronged approach: support stronger anti-predatory lending legislation and regulations, foster consumer education, and build on NAR's Public Awareness Campaign.

The enhanced policy proposed solutions to current problems in the subprime mortgage market where many homeowners face the risk of default and foreclosure as the interest rates on their mortgages reset in 2007 and 2008. In the last few years, many subprime mortgages were underwritten based on initial "teaser" rates." At the end of the initial two or three year periods, borrowers face significant increases in their monthly payments, ordinarily every six months. Refinancing of these mortgages to avoid the increase is now difficult or impossible because home values have been stable or decreased in many markets.

NAR believes that all mortgage originators should treat all parties in the transaction honestly, as REALTORS® are already required to do under NAR's Code of Ethics. The enhanced policy includes detailed responsible lending principles that require mortgage originators to determine if the applicant has the ability to repay the mortgage. It is abusive to underwrite subprime loans that include potential "payment shock" based solely on the initial payment amount under the loan. Lenders should offer borrowers a reasonable choice of mortgages that appropriately reflect the borrower's credit risk, and borrowers should have information and alternatives so they can make the best choice for their circumstances.

Strong criminal and civil remedies and penalties should be imposed for abusive acts by mortgage originators. NAR also supports legislation to make GSE, FHA, and VA loans more available to give subprime borrowers a safe and affordable alternative to problematic loans. Finally, the enhanced policy supports mortgage lender, legislative, regulatory, and private-sector foreclosure avoidance and mitigation efforts.

NAR DISSAPOINTED IN SUPREME COURT BANK RULING

NAR President Pat Vredevoogd Combs says she’s concerned about the U.S. Supreme Court’s ruling on Tuesday that the mortgage subsidiary of Wachovia Corp., a national bank, isn’t subject to oversight by state regulators and the implications that ruling could have on the real estate industry. The Supreme Court said Wachovia’s mortgage unit instead will be regulated by the Office of the Comptroller of the Currency, a federal banking regulator. The ruling could mean that if banks are ever allowed to enter the real estate business, which Justice John Paul Stevens identified as a possibility in his dissent, the OCC may claim that real estate brokerage subsidiaries qualify for a similar exemption from state regulations, Combs says. She also notes the ruling gives federally chartered banks a major competitive advantage over their non-national counterparts, at the expense of state licensing, marketplace competition, and perhaps even consumer protection measures.

CONGRESS TAKES ON LENDING INDUSTRY
Congress is targeting the rising tide of home foreclosures and the sagging subprime loan business, and its efforts are likely to result in changes in the way the home finance industry does business.

Here are some key proposals on the table:

Impose a six-month national moratorium on foreclosures.
Increase federal support for local foreclosure prevention programs.
Strengthen the Federal Housing Authority and give it a "rescue fund" that would allow it to buy failed mortgages and restore credit on the loans Increase penalties on banks that violate federal lending laws.
Extend federal regulations to mortgage brokers and other loan officers who are now only regulated by state laws.
Create a federal anti-predatory lending law.
Establish a federal standard for a borrower's ability to pay.
Source: Gannett News Service, Ana Radelat (04/13/07)