New industry oversight update

Inman news is reporting on the latest efforts by Congress to regulate  the mortgage industry after the subprime fallout. It seems like the news media has forgotten about the subprime crisis, at least for now. However, with so many ARM’s yet to adjust I’m sure we have not heard the last.

Here is a broad outline of what one Senator is doing (from Inman News): 

The bill, The Borrower’s Protection Act of 2007, would impose suitability standards for assessing a borrower’s ability to repay a mortgage, and hold lenders accountable for the actions of brokers and appraisers.

Schumer’s bill would establish a fiduciary duty for mortgage brokers and originators and create a “faith and fair dealing” standard for all originators. Originators would be required to underwrite loans at the fully indexed rate and create escrow accounts for subprime loans to pay taxes and insurance.

The legislation would also prohibit mortgage brokers from “steering” — counseling borrowers to accept rates, charges and principal amount or prepayment terms that are not suitable for them. Lenders would be held responsible for policing their brokers and appraisers, and originators would be prohibited from influencing the appraisal process.

There is also a provision to set aside $300 million to help borrowers with counseling and other non profit services. I idea is to help those who run into difficultly. This provision has the  blessing of the Mortgage Bankers Association, unlike the other provisions mentioned above.

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