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Mortgage issues that Congress should act on to help consumers 

By Jeff Lazerson

9/6/18

What I think: It’s mortgage convention season. My bags are packed and I’m ready to go, always excited to report back to you about what I’ve learned by way of hot topics and hotter mortgage programs.

Knowing that Congress is listening, industry leaders, government agency big wigs, policy makers and regulators will be crowing about their perceptions of what is good and what requires improvement.

What about a voice for consumers?

Based upon the hundreds of emails and phone calls I’ve received over the years from my readers, here are the top seven mortgage-related issues that Congress needs to act upon.

1)  According to the most recent reports from the Federal Housing Finance Agency (Fannie and Freddie’s regulator) Fannie Mae and Freddie Mac borrowed $191 billion from the U.S. treasury during the meltdown days and have paid back a total of $285 billion. The $94 billion in profit is because you are paying a hidden tax of roughly .125 percent higher in your Fannie or Freddie interest rate in something named a guarantee fee. Well, instead of the already posted profits as well as any new money going directly to the general fund of the U.S. Treasury, that money should be designated for construction of affordable housing, housing America’s homeless and subsidies for renters trying to become homeowners. And, that money is to be designated to the state for which the hidden tax was generated. And, leave Fannie and Freddie alone in government conservatorship. It’s working just fine.

2)  Builders may offer their buyers thousands of dollars in mortgage closing cost credits so long as the buyers purchase upgrades from the builders’ design center and use the builders affiliated mortgage company. Buyers assume that the builder’s mortgage company will be as competitive as anywhere else. An enforcement official once told me that he was just stunned at how much higher the mortgage rates were when it came to his observations about builders’ designated mortgage companies. Ban builders from being able to swap design center credit for affiliated mortgage services. New construction buyers typically want that new home so badly that they rarely appreciate how getting themselves contractually locked down to the home, decorator center and mortgage company can play out in higher costs.

3)  Plenty of people have equity that they simply can’t tap from their primary residence because they can’t qualify for any mortgage. At minimum, they are forced to sell to tap their equity. Emergencies, funds for fixing up and selling or anything else stops with the law. According to attorney Dennis Doss of Silverado, balloon payments on hard money loans were banned in January 2016 as part of Dodd-Frank. And, prepayment penalties are banned on all owner-occupied loans since 2010 Dodd-Frank. Regardless of equity, hard money lenders who typically lend to riskier borrowers at higher interest rates will not loan to owner-occupied borrowers because they don’t want their money tied up for 15 years, for example. Let folks make their own decisions by allowing five-year balloon payments for borrowers that can prove at least 40 percent equity left after the new loan is made and can prove only a hard money lender was able to make the loan.