Nation

PREDATORY LENDING BILL PASSES HOUSE

The U.S. House of Representatives approved controversial legislation intended to combat predatory lending. HR 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, would create a national licensing system for mortgage loan originators and require lenders to determine that borrowers have a reasonable ability to repay a loan. The bill would also create limited liability for companies that bundle mortgages for sale to Wall Street investors. Although the Bush administration opposes many of the bill's provisions, HR 3915 received bipartisan support in the House, where it was approved in a 291-127 vote. The bill's most contentious restrictions include a ban on incentive payments brokers and loan officers receive when they place borrowers in high-cost loans, and prohibitions on prepayment penalties used to discourage borrowers from refinancing their loans. Some say the bill will make it more difficult for renters to become home buyers, and make lenders and investors incur more legal liability. The bill incorporates provisions of another bill (HR 3837) aimed at curbing coercion of appraisers and deceptive servicing practices into HR 3915. The provision in question would require escrow accounts on high-cost loans to cover property tax and insurance payments. Sen. Christopher Dodd, D-Conn., is expected to introduce legislation with similar goals, but which may not incorporate all of the new restrictions envisioned by the House. NAR took no position on HR 33915 but the National Association of Mortgage Brokers strongly opposed it.

SWEEPING APPRAISAL LEGISLATION IN BROAD MORTGAGE REFORM BILL

On November 15, 2007, the House passed H.R. 3915 the Mortgage Reform and Anti-Predatory Lending Act. The provisions of H.R. 3837 the Escrow, Appraisal and Mortgage Services Improvement Act (EAMSIA) were incorporated into H.R.3915 as part of a manager's amendment.

The appraisal provisions:

Require that an appraisal be made available to the consumer prior to closing,

Mandate property visits for mortgages covered by the Homeowners Equity Protection Act (HOEPA),

Require the appraisal subcommittee to hold open meetings and publish detailed reports,

Amend the Truth in Lending Act to prohibit mortgage originators from improperly influencing the appraisal process: which is defined as collusion, intimidation, coercion, bribery etc.

Amend FIRREA to prohibit those with an interest in the real estate transaction from improperly influencing the appraisal process, with the following exceptions: a) to correct errors, b) to request the appraiser consider additional information, and c) to provide substantiation,

Set Appraisal Qualification Board guidelines as the minimum criteria for state licensing, increases regulatory authority of the Appraisal Subcommittee in sanctioning, reciprocity, and information sharing,

Require that only licensed appraisers review appraisals submitted to appraisal management companies and to clarify that these firms and their employees are also subject to the improper influence language of the bill.

The Senate Banking Committee is working on a companion bill. Timing for introduction and consideration is uncertain.