Barney Frank’s Statement on the Federal Reserves Proposed Changes to HOEPA
Washington, DC – Rep. Barney Frank, chairman of the House Committee on Financial Services today released the following statement in reaction to the Federal Reserve’s proposed rules on the Home Owner’s Equity Protection Act (HOEPA): “The staff of the Financial Services Committee and I have had a chance to review the Federal Reserve’s proposed rules regarding abusive subprime loans.
We now have confirmation of two facts we have known for some time: one, the Federal Reserve System is not a strong advocate for consumers, and two, there is no Santa Claus. People who are surprised by the one are presumably surprised by the other.”
For immediate release
The Federal Reserve Board on Tuesday proposed and asked for public comment on changes to Regulation Z (Truth in Lending) to protect consumers from unfair or deceptive home mortgage lending and advertising practices. The rule, which would be adopted under the Home Ownership and Equity Protection Act (HOEPA), would restrict certain practices and would also require certain mortgage disclosures to be provided earlier in the transaction.
- Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers’ ability to repay the loan.
Creditors would be required to verify the income and assets they rely upon in making a loan. Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least sixty days before any possible payment increase. - Creditors would have to establish escrow accounts for taxes and insurance.
- Lenders would be prohibited from compensating mortgage brokers by making payments known as “yield-spread premiums” unless the broker previously entered into a written agreement with the consumer disclosing the broker’s total compensation and other facts. A yield spread premium is the fee paid by a lender to a broker for higher-rate loans. The consumer’s written agreement with the broker must occur before the consumer applies for the loan or pays any fees.
Creditors and mortgage brokers would be prohibited from coercing a real estate appraiser to misstate a home’s value. - Companies that service mortgage loans would be prohibited from engaging in certain practices. For example, servicers would be required to credit consumers’ loan payments as of the date of receipt and would have to provide a schedule of fees to a consumer upon request.
Under the proposal, creditors would have to provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer’s principal dwelling, such as a home improvement loan or a loan to refinance an existing loan. Currently, early cost estimates are only required for home-purchase loans. In addition, consumers could not be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer’s credit history.
The proposal takes into consideration testimony given at four public hearings the Board held in the summer of 2006, and a hearing held in June 2007, as well as public comment letters received in connection with those hearings. The Board also consulted with other federal and state agencies and its own Consumer Advisory Council.
{ 8 comments… read them below or add one }
I thought this was good news, Moe. Am I wrong?
Also, Moe, are you going to comment on the proposal?
Since when is it up to the government to dictate what people monies make in the private sector??
If this goes through, it opens the door for the government to dictiate what anyone in the private sector can earn. This is real “Big Brother.”
Will banks have to disclose what they make on a transaction. Banks make more than a broker does all day long.
I don’t see one mention of banks having to disclose what they make.
MMMMmmm. Who really runs the Fed? Bernacke and his crew are just puppets. The banks are ones pulling the strings here.
Why do you thing BOA was the number one originator of home loans last year? The use the same practices as every broker out there.
They don’t have to disclose what they make though. Most times the borrower gets jabbed the hardest from the banks.
So it is obvious why the banks are pushing the feds buttons. If mortgage brokers take the fall for all this, the banks win big.
Moe, your site is overrun by Mortgage brokers ex-brokers with too much time on their hands due to this crisis — no more fast and sleazy to peddle on the corner, I suppose.
We’re always going to get a lot of opposition and here are a lot of mortgage people that are out of business. Some were good, a lot bad.
As far as the new proposed changes, they really are not much of a change to anything. Think about it? We had a lot of rules and regs is place and where did that get us? Look at where we are at today as our country goes bankrupt and CEO’s bank 100’s of millions of dollars.
I mean, look at what they are saying JacMac, should’nt that all be like, “common sense?” Yes…………….
There will always be ways around the rules when there is a lot of money involved.
I guess it’s the hopeful optomistic in me that actually wants to BELIEVE the goverment will do what they say this time. But you’re right, the rules were in place and flouted.
I do believe there were and are good mortgage brokers out there. In the case of the ones who come to your site to try to bash the homeowner and glorify themselves I say this: Me Thinks Thoust Protest Too Much!
WHAT ABOUT US POOR SUCKERS THAT WERE DUPED INTO BELIEVING WE COULD AFFORD A MORTGAGE THAT IS OVER 50% OF INCOME BEING TOLD THE ONLY WAY IT WOULD WORK IS TO PAYOVER $7000 TO BUY DOWN RATE 2.9% TO STILL END UP WITH A RATE OF 8.43%. OH YEAH CANT SELL IT DUE TO A PREPAYMENT PENALITY OF ABOUT$10,000 IF PAID PRIOR TO 2 YEARS. HOW DOES A GUY WITH A 526 FICO A$50,000 DOLLAR A YEAR JOB GET A $250,000 HOME LOAN ON A $285,000 VALUED HOUSE.