FHA Mortgage Guide

Tuesday, November 6th, will be a big day for borrowers, lenders and the nation’s economy. Why? At 10 AM tomorrow the House Financial Services Committee will meet in 2128 RHOB to “markup” several bills which are central to today’s mortgage crisis. The most important is -3915″>H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007. Introduced by Rep. Brad Miller (D-NC) and co-sponsored by Committee Chairman Barney Frank (D-MA), this measure, as now written, would modernize both the mortgage marketplace and the bankruptcy system.

The heart of H.R. 3915 changes the Truth in Lending Act by saying that lenders have a “duty of care” to promote the interest of the consumer in obtaining “the best terms for a residential mortgage loan for which the consumer qualifies.” This is not the creation of a fiduciary relationship where a loan officer must act as your agent, but it is — roughly — 12,000 times better than anything borrowers now have, which is zilch.

The bill would require that mortgage originators must be licensed. One condition of licensure would be that loan originators must “act solely in the best interest of the consumer, including finding the residential mortgage loan that best meets the needs of the borrower, and to meet any other duties incumbent on the mortgage originator under Federal or State law when acting in such a capacity.”

The bill also severely limits prepayment penalties and says that even when allowed prepayment penalties must end three months before the date of any the first adjustment or reset. This provision would allow borrowers to refinance before monthly costs rise to bankrupting heights.

Let’s see what happens to H.R. 3915. If it makes it through the House committee it must then be passed by the full House, a like bill must pass through the Senate and then any final proposal must be signed by the President to be enacted a law. That’s a long road but nothing like the Miller bill has gotten this far, a credit to the Frank committee.

With the country in the midst of a growing financial crisis, one which will get worse, a modernized mortgage industry is a national necessity. The alternative is tottering banks and brokerages, more foreclosures, reduced home values, investor losses and an economic catastrophe not seen in decades. Alternatively, if we keep the current system in place you have to ask: Who will benefit — and who will be hurt?

Check out these FHA resources for more information

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