Mortgage Lender Legislative Issue
As part of MBA’s policy agenda for 2009, it hopes to see permanent increase in conforming loan limits, the use of tax incentives for homebuyers, ensure and increase liquidity, the use of TARP to purchase troubled commercial and residential loans, the expansion of TALF program to stabilize the CMBS and RMBS markets, re-evaluate fair value accounting, stimulate the multifamily sector, preserve bankruptcy laws (no cramdowns), implement a government-guaranteed refinance program, focus assistance on the no-contact borrower, preserve and improve affordable rental housing, pass mortgage reform legislation, ensure FHA’s future viability, strengthen financial education and mortgage counseling, preserve current accounting rules regarding securitized loans, real estate mortgage investment reform, and preserve current tax treatment of carried interest.
Congress should defeat bankruptcy reform legislation that would allow cram downs of mortgages secured by primary residences in order to avoid further dislocations in the mortgage lending market. Permitting cram down will adversely impact mortgage interest rates and credit availability because lenders will be faced with new levels of uncertainty as to loss. As a result, borrowers would face higher downpayments, higher costs at closing, higher interest rates and could lose access to government loan programs.
Accurate appraisals are one of the fundamental components of the loan decision because a borrower’s credit and willingness and ability to repay are only two of the three ‘Cs’ (credit, capacity and collateral) used by lenders to make lending decisions. In the event a borrower is unable to meet the payment obligations of a loan, the underlying property serves as the collateral for the obligation. Appraisal estimates are expected to be unbiased reports. With increased concerns about lending practices brought about by current market conditions and the rise in delinquencies, anti-predatory lending proposals with a focus on altering existing appraiser and appraisal standards are keen on legislators’ minds. MBA is especially concerned that policy-makers will increase industry regulation where it already exists to ban coercion on appraisers to artificially inflate values and expose lenders to additional liability and expense.
Automated Valuation Model (AVM) technology can augment and streamline the appraisal process, but currently lacks standardization which would benefit the industry. Standardization is needed in terms of investor requirements, interface with fraud detection systems, data standards, and accuracy measurements.
MBA believes that AVM technology is an important emerging tool in residential mortgage banking, especially when used to augment existing processes. MBA recommends that the industry standardize investor acceptance requirements, standardize how AVMs interface with fraud detection systems, and standardize the underlying data information, including refresh rate.
If possible, MBA, in collaboration with the AVM industry and other Associations, should establish objective certification criteria by which AVM product and service providers can be measured against, to meet the secondary market acceptance criteria. As a result of AVM data and transaction standardization, along with standardized reporting and certification criteria, AVM technology will provide better-quality information to the industry, and ultimately become even more useful and widely adopted.
Congress should not enact a foreclosure moratorium or mandatory payment forbearance, as moratoriums and forbearances will increase the number of delinquencies, harm the borrower’s ability to recover and are likely to fail to save homes from foreclosure sale.
Ordinances will further deteriorate the mortgage market by placing unreasonable requirements upon servicers. Mortgage market participants will have no choice but to respond to these unreasonable requirements by significantly reducing their current business or ceasing to make further investments in the communities with unreasonable registration ordinances. Mortgage Bankers Association (MBA) continues to oppose a patchwork of onerous ordinances requiring such things as database registration fees, capital improvements, securing doors and windows with steel, supplying electricity to vacant buildings which increases fire and break-in risk, and installing security systems that historically get stolen and do not stop illegal activity.
MBA requests Congress to help make mortgage credit more available and affordable by setting the Fannie Mae, Freddie Mac (GSEs) and Federal Housing Administration (FHA) standard, nationwide loan limits at $625,500, and up to $729,750 in high-cost areas on a permanent basis.
Mortgage Fraud Perpetrated Against Residential Lenders
