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Welcome to the New Housing Bill Webinar
Housing and Economic Recovery Act of 2008
Impact on Mortgage Lending
Joseph M. Kolar Jeffrey P. NaimonBuckley Kolar LLP
www.buckleykolar.comAugust 14, 2008
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Please take a moment to answer the polling question as we wait for the session to begin.
For your company, are you involved in?A) Business OperationsB) Government RelationsC) LegalD) Other
Polling Question
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Highlights• Significantly higher conforming loan limits• New authority for FHA refis of troubled loans• Federally mandated originator licensing / registration• Prohibits FHA seller down payment assistance• Postpones “risk-based” FHA premiums• New rules for FHA reverse mortgage loans• New requirements for TILA disclosures• Enhanced Servicemember relief• Change to servicer duty on loan modifications• GSE structural Reform• Housing tax incentives
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Loan Limits
• GSE Single Family - $417,000– High-cost areas – 115% of median home
price, but capped at $625,500
• FHA Single Family Limit – Lesser of– 115% of the median home price; or– 150% of the GSE limit ($625,500)– Limit never falls below 65% of GSE limit
($217,050)
• HECM Limit - TBD
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Hope for Homeowners• New $300B voluntary program to allow investors to refi into
FHA loan rather than foreclose – Rep. Frank letter to servicers to postpone foreclosure
• New FHA loan may be originated from 10-1-08 to 9-30-11• Investor takes “short payoff” on payoff of old loan – 87% of
current appraised value– HUD to issue mortgagee letters and guidance
• GNMA authorized to guaranty MBS backed by new loans• Cost of program paid by GSEs housing fund• New Board (Treas, Fed, HUD, FDIC) to issue regs, standards,
guidance
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HfH – Borrower Qualifications
• Old loan originated before Jan. 1, 2008• Cannot afford mortgage payments• DTI at 31% on March 1, 2008 (Board can
amend)• Certify has not intentionally defaulted or
submitted false statement to get loan• Not convicted of fraud in last 10 years• Occupies property as principal residence• Sole interest in any property
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HfH – Refi RequirementsNew Loan
• Rate determined by ability to repay
• Fixed, at least 30-year• Amt. can’t exceed 90%
of appraised value • Max amt = $550,440• Contain Compliance
Reps and Warranties
Lender• Waive fees/penalties• Extinguish subordinate
liens• No new second liens
within 5 years w/o approval
• Independent appraisal• Document and verify
income (2-years)
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HfH – Government Recoupment• 3% initial premium payment
– Comes out of loan payoff so investor gets 87% of appraised value max (lower if orig. fees also paid by investor)
• 1.5% annual premium payment• Origination fee – Board will cap• Equity Appreciation – HUD splits appreciation on sale or
refi of property on sliding scale– HUD gets 100% if sale in 1 year, 50% after 5 years– HUD can provide portion to second lienholder to
incent cooperation
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Appraiser Independence• On HfH loans, no person with interest in
transaction (lender, broker, RE broker, etc.) may improperly influence appraisal through coercion, compensation, instruction, nonpayment, bribery, inducement, etc.
• Similar to new TILA regulations• NY AG Appraisal Code
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Polling Question
Do you anticipate that your company will be inclined to utilize the new Help for
Homeowners program?
A) YesB) No
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Servicer Duty for Pooled Mortgages
• Except as established in contract, servicers owe any duty to maximize net present value of the pooled mortgages to all investors and parties, not to any individual party or group (such as residual holders).
• Deemed to act in the best interests of all investors and parties if recovery on loan modification is greater than the anticipated recovery through foreclosure.
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S.A.F.E. Mortgage Licensing Act
Loan Originator (LO) Licensing
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Objectives
• CSBS and AARMR to establish Nationwide Mortgage Licensing System and Registry
• Provides for uniform applications and reporting requirements, comprehensive licensing database
• Provides consumers with access to employment and disciplinary history of loan originators
• Establishes means by which loan originators would, “to greatest extent possible, be required to act in best interests of consumers”– Nothing in operative language to effect this
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Loan Originator Licensing• Two types of Loan Originators (LOs)
– “Registered LO” – Employed by federally-regulated depository institution or sub
• No licensing requirement• Must be registered in database
– “State-licensed LO” – All other LOs• Must be state licensed to act as LO• Must be registered in database
• Effect on “exclusive agents” of OTS Thrift– State Farm Letter– Rep. Frank - Rep. Marshall Colloquy
• Not intended to limit OTS preemption
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LO Licensing – Who’s Covered II
LO Definition• Individual who takes
residential mortgage application AND
• Offers or negotiates terms of mortgage for compensation or gain
• “Assisting a consumer in obtaining or applying to obtain loan” also defined
LO does NOT include• Administrative/clerical
tasks– UW– Gather borrower info– Consumer Contact OK
• State-licensed real-estate broker– unless compensated
by lender, broker, LO
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LO Licensing – Requirements
• Fingerprints• Report personal histories• Education
– 20 hours of pre-licensing– 8 hours continuing
• Pass written test• No conviction or license removal past 7 yrs
– Never convicted of fraud, money laundering, breach of trust, dishonesty
• Min. bond or net worth (or recovery fund) based on originations
• Mortgage Cos. must submit reports of condition
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LO Licensing - Timing• States have 1 year (2 if biennial legislature) to
implement licensing system
• If not, HUD steps in with back-up regime
• HUD can grant up to 24 mos. extension
• FFIEC system for registration of “Registered LOs” – implemented by July 30, 2009
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FHA Modernization Act• Increased FHA loan limits• Downpayment
– Raised to 3.5% minimum (family loan may be used)– Eliminate seller down payment assistance (through Nehemiah
program, etc.)• Permits financing up to 100% of property value• Premiums
– Cap raised to 3.0% on up-front– No change in annual– FHA may adjust if Fund is in trouble– 1-year moratorium on risk-based premiums
• Effective – 10/1/08– Grandfathers loans with case number issued beforehand
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FHA Reform – HECMs
• Limit – waiting for HUD final determination
– $417,000 with adjustment given MSA (1/1/09); or– $271,050 to $417,000 (10/1/08)
• Allows HECM in a purchase transaction• Origination fee
– 2.0% for first $200,000 in claim amount– 1.0% for portion thereafter– Fees may be financed– Capped at $6,000 (indexed for inflation)
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FHA Reform – HECMs II• Prohibition on Cross-Selling
– Parties participating in origination may NOT be involved with any other financial or insurance activity OR
– Demonstrate to HUD firewalls to ensure person participating in origination not involved with, or gets incentive to provide, financial or insurance products and no tying of products
– HUD to issue “Request for Information” before issuing rulemaking
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FHA Reform – Misc.• Nontraditional credit rating pilot program
– For borrowers w/o sufficient credit history
• Manufactured housing– RESPA §§ 3,8,16,17,18 and 19 now applicable– HUD to prohibit practices that are “unfair, deceptive, or
otherwise not in the interests of the borrower”– Condos may now be insured– Loan limit $69,678 (unit) – 1/1/09
• Expansion of FHA insurance for condos and energy-efficient mortgages
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Servicemember Protections
• Foreclosure stay– Extended to 9 months following discharge– Back to 90 days after 12/31/10
• 6% interest-rate cap for active members terminates 1 year after duty
• Secretary of Defense– Authorized to create counseling program– Improve and make structural alterations to
residences of permanently disabled
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TILA Disclosures• Effective June 30, 2009
– Early TIL for all dwelling-secured loans, and 7 days before closing– No fee before early TIL received (assume 3 days after mailing), except credit
report charge– New “Not required to close” disclosure
– Final TIL required at consummation– If APR inaccurate, redisclose 3 days before closing– Civil Damages doubled - Now $400-$4,000
• Effective – 30 months or other date set by FRB– “Payments Vary Based on Rate Changes” on pymt schedule
• Give examples w/ max pymt amt and max rate
• FRB to do testing
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Tax Provisions• Temporary increase in low-income housing tax credits
• Refundable first-time homebuyer credit equivalent to an interest-free loan equal to 10% of the purchase price of the home up to $7,500
• Non-itemizer property tax deduction
• Temporary increase in mortgage revenue bonds
• Repeal of AMT limitations on tax-exempt housing bonds, low-income housing credits, and rehabilitation credit
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Community Investment Authority
Formerly“To make investments
directly or indirectly, each of which promotes the public welfare by benefiting primarily low- and moderate-income communities or families .”
Now“To make investments
directly or indirectly, is designed primarily to promote the public welfare, including the welfare of low- and moderate- income communities or families.”
Amends the Corporate Powers of Banks (Para. Eleven 12 USC 24)
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GSE Reform - Structure
• Federal Housing Finance Board – strategy– Treasury, HUD, SEC, FHFA Director
• Appointed Director• Deputy Directors
– Enterprise Regulation– Housing Mission and Goals– FHLB Regulation
• Free from appropriations process
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GSE Reform – New FHFA Powers
• Full regulatory power– Portfolio Control– Risk-based capital Requirements– Prudential Management– C&D Authority/Civil Money Penalties– Receivership
• Affordable Housing– Fund– Requirements– HOPE bonds
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GSE Reform – Product Approval
“Product”• GSE Requests Approval• 30-day public comment• Director approve/deny
within 30 days– Can condition approval
“Activity”• Something GSE considers
“not” a product• GSE requests Approval• Director has 15 days to
– Approve– Deem a product
Approval Factors – Public Interest; Within Charter; S&S
Exempt – AU updates; Changes to Underwriting Criteria
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GSE Reform - Reporting
• Financial reports to FHFA (with penalties)• Purchases and sales of fraudulent loans• Affordable housing data so Director can
determine whether interest-rate disparities– Can report lender data to regulatory agencies
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Federal Home Loan Banks
• Come under a single director• Number of Banks can be reduced below 8• FHFA to study
– Benefits and risks of FHLB securitization– Advance collateral compliance with nontrad
mortgage guidance
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Required Studies
• FHFA – ways to improve overall default risk evaluation for residential mortgages
• HUD– RESPA study and legislative recommendations– Report on root causes of defaults and foreclosures– Plan to preserve homeownership, prevent
foreclosure, and improve FHA loss-mitigation program
• HOPE Board – study on need for auction or bulk refinancing mechanism
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CONTACT INFORMATIONJoseph M. Kolar, P.C.Partner Buckley Kolar LLP1250 24th Street, N.W., Suite 700Washington, D.C. 20037(202) 349-8020(202) 349-8080 (fax)[email protected]
Jeffrey P. NaimonPartner Buckley Kolar LLP1250 24th Street, N.W., Suite 700Washington, D.C. 20037(202) 349-8030(202) 349-8080 (fax)[email protected]
Bill HimplerExecutive Vice President, Federal AffairsAmerican Financial Services Association919 18th Street, NW Suite 300Washington, DC 20006(202) 466-8616fax: (202) [email protected]
www.afsaonline.org
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