Talking Points:

Definition of Loan Originator

Strike the definition of "Loan Originator" in the Merkley/Klobuchar Amendment (SA 3962) and replace it with the definition of "Loan Originator" in the SAFE Act.

§ NAMB believes the definition of "loan originator" in the Merkley/Klobuchar Amendment (SA 3962) should be consistent with the definition of "loan originator" in the "S.A.F.E. Mortgage Licensing Act" (Title V of P.L. 110-289, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008) to maintain consistency with existing federal law that has already been interpreted by the states.

o The S.A.F.E Act is a federal law created minimum licensure standards for mortgage loan originators and requires loan originators to register with the Nationwide Mortgage Licensing System and Registry (NMLS). The definition of loan originator as defined by the S.A.F.E Act has been adopted by the majority of states as each state has to enact minimum licensure standards for mortgage originators.

§ This change ensures that all loan originators are covered by the anti-steering prohibitions of the amendment and provides uniformity and consistency with existing law.

§ Currently, the amendment defines "loan originator" as a "person," which under TILA includes companies, and is not confined to only individuals. The definition under the S.A.F.E Act defines "loan originator" as the individual.

Home Valuation Code of Conduct (HVCC)

Sunset the HVCC upon enactment of this legislation and replace it with a more coherent and workable system, while ensuring appraisal independence, and creating new standards.

§ NAMB believes language contained in House passed bill H.R. 4173 to sunset the HVCC and replace it with a more coherent and workable appraisal independence solution should be retained in Conference Committee.

§ On May 24^th, Representatives Childers (D-MS), Baca (D-CA), Sherman (D-CA), Miller (R-CA), and Manzullo (R-IL) sent a letter to Speaker Pelosi (D-CA), Minority Leader Boehner (R-OH), House Financial Services Committee Chairman Frank (D-MA) and Ranking Member Bachus (R-AL) urging them to retain the HVCC language in H.R. 4173 in Conference. For a copy of the letter, click here.

§ NAMB supports legislation that would, upon enactment:

o Sunset the controversial HVCC prior to its expiration date and replaced it with a more coherent and workable appraisal independence solution;

o Require the GAO to conduct a study on the effects the HVCC has had on mortgage brokers, other small business professionals and consumers;

o Create strong appraisal independence rules;

o Impose greater scrutiny on industry participants in the appraisal process;

o Provide greater protections to consumers who engage in the mortgage process; and

o Provide strong federal standards for the AMCs.

Consumer Choice on Financing Costs

Language regarding direct and indirect compensation should eliminate any potential abuse in the use of "incentivizing compensation" without removing a consumer's choice to use it as a legal and viable financing option.

§ Language should ensure that a borrower has the ability to finance closing costs as they deem appropriate for their individual circumstances (i.e. cash available at closing, length of time planning to remain in home, refinance, etc.)

§ NAMB supports language that will preserve the borrowers' ability to choose low-cost and zero-point financing for their homes, and ensure borrowers are still able to benefit from financing their closing costs in any manner the consumer decides - part up-front and some in the rate - removing the government's role in their decision.

3% Safe Harbor and Risk Retention

In reconciling language during Conference Committee, clarification of inconsistencies in language should remove conflicting underwriting standards; and reconsider language that would directly correlate fees paid by borrowers with the borrowers' ability to repay.

§ There are issues of concern for small loan amounts ($150,000 and below) created by the 3% safe-harbor provisions of the Merkley/Klobuchar Amendment and the 2% safe harbor included in the House passed bill H.R. 4173. The 2% and 3% safe harbor (consumers' "ability to repay") for fees and expenses will hurt low-income borrowers, minorities, first-time homebuyers, and rural areas since these property prices tend to be lower than $150,000.

o Under the present construct with the Merkley/Klobuchar and Landrieu/Isakson amendments, a loan could be exempt from the 5% risk retention requirements but not pass the ability to repay safe harbor section of the Merkley/Klobuchar amendment. Creditors will have conflicting underwriting standards with which they must comply being written by two different agencies and banking regulators.

o A resolution to this issue would be to create a safe harbor in the Merkley/Klobuchar amendment for having met the ability to repay standards if the mortgage meets the criteria for qualified residential mortgages as defined in the Landrieu/Isakson amendment. This approach will remove any chance of a conflict between loan products referenced under the Landrieu/Isakson amendment and loan products referenced in the Merkley/Klobuchar amendment.

§ Often, the -strongest borrowers" choose to pay additional points to drive their interest rates well below market. These borrowers would become victims of a well intentioned provision if lenders refuse to provide loans where they are denied a presumption of ability to repay.

§ Consumers who choose FHA, VA or USDA financing would be further penalized because 1% of their mandatory mortgage insurance would be included in the fee. Many loans today have up-front mortgage insurance and would also be affected.

§ Consumers seeking FHA.VA & USDA loans of less than $600,000 would be unable to obtain financing since very few, if any, lenders are willing to risk the loss of the safe harbor to satisfy the bill's "Ability to Repay" test. If this provision were to remain in law, all loans outside the safe harbor will disappear from the market.

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