Congressional bills could fuel a new race to the bottom

By Jeff Lazerson

10/6/17

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

Rate news summary

From Freddie Mac’s weekly survey: The 30-year fixed rate averaged 3.85 percent, up two basis points from last week’s 3.83 percent. The 15-year fixed averaged 3.15 percent, also up two basis points from last week’s 3.13 percent.

The Mortgage Bankers Association reported loan application volume was unchanged from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $424,100 loan, last year’s rate of 3.42 percent and payment of $1,886 was $102 less than this week’s payment of $1,988.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at one point cost: A 15-year at 2.875 percent, a 30-year at 3.50 percent, a 15-year agency high-balance ($424,100 to $636,150) at 3.0 percent, a 30-year agency high-balance at 3.75 percent, a 15-year jumbo (over $636,150) at 3.5 percent and a 30- jumbo year at 3.75 percent.

What I think: Over the past seven years, the mortgage space has grown safer and more stable for mortgage shoppers, industry workers and all other stakeholders.

We all know from experience that neighborhood stability and a healthy real estate market can be fleeting. Diluted consumer protection laws will certainly invite nefarious lender activity, and just like that, we can be headed for another slippery slope.

Believe it or not, there is a proposed bill in Congress (H.R. 1964, the Community Mortgage Lender Regulatory Act of 2017) that precludes the Consumer Financial Protection Bureau from auditing, investigating or taking any enforcement action against most non-depository lenders who have a net worth of less than $50 million unless the CFPB receives a referral from a federal, state or local regulator. Non-depository lenders include mortgage bankers and a few mortgage brokers who directly fund loans.

Are you kidding me? This means no federal mortgage police will be able to independently initiate audits, deter nefarious activity and enforce phone books full of critical consumer protection laws.

Recall that important fair lending and anti-kickback enforcement was taken from HUD and given to the CFPB under Dodd-Frank.

In support of this bill, Glen Corso, executive director of the Community Mortgage Lenders of America points to regulatory compliance costs that are especially burdensome for smaller lenders.

“State enforcement is much more sophisticated than you think,” said Corso.

The California Department of Business Oversight is the state regulator for mortgage bankers. Its spokesperson, Mark Leyes, said, “DBO has no comment on HR 1964.”

Well, that’s clear as mud. Feds could be out. And, who knows if the state has the knowledge, interest, bandwidth or budget to do double duty.

Joyia Emard, information officer at the California Department of Consumer Affairs, explained in part that the California Bureau of Real Estate Mortgage Loan Activities Unit has special investigators whose primary responsibility is investigating mortgage loan-related violations of the California real estate law. Its staff has no expertise outside of California law, but they are trained to recognize and refer outside matters to the appropriate authorities.

How about another stupid idea?

H.R. 2948 and Senate Bill S. 1753 propose 120 days of temporary licensing for depository loan officers (banks and credit unions) to go to work for state-licensed lenders. The assumption is these folks know what they are doing, can pass the rigorous written testing and background investigations.

Under current law, anybody can go to a depository institution and apply to be a registered mortgage loan originator. No testing standards.

This proposal, which the Mortgage Bankers Association supports, is a slap in the face to typically trusting consumers and every licensed mortgage loan originator in America.

Only about 20 percent of the people prosecuted by the Orange County District Attorney were licensed since the 2009 inception of the real estate and major mortgage fraud unit, according to Senior Deputy District Attorney Pete Pierce.

“Speaking as a veteran prosecutor, any attempt to limit the amount of licensing and regulation would be a bad idea,” said Pierce.

We have an abundance of compliance and red tape that needs to be chopped down. But, we shouldn’t throw the baby out with the bath water.

If you have questions or comments, please contact Jeff Lazerson by clicking here.