Reps Gone Wild: New Act Seeks to Eliminate FHA Approval Requirements
June 17, 2008 – 1:56 pmTemporary FHA Direct Endorsement Lender Participation Act of 2008
Just when you thought it was safe to go into the mortgage water again, California Representative Gary Miller [R] along with California Representatives Joe Baca [D] and Brad Sherman [D] introduce H.R. 6254 to the House which would allow non FHA approved mortgage brokers to originate FHA loans. Click here to view H.R. 6254.
What H.R. 6254 proposes is to amend Section 202 of the Economic Stimulus Act of 2008 to temporarily allow non FHA approved lenders and mortgage brokers to originate and close FHA loans in their own name upon filing an application for FHA participation approval. However, the lender or mortgage broker would not have to comply with FHA’s requirement of submitting a financial statement.
Still, mortgage brokers can already participate in the FHA program as borrower agents, consultants, and representatives on FHA forward and reverse mortgages with the restriction of not being allowed to originate, process, or close the loan in the non-approved brokers name. Instead, the loan must be originated by a FHA approved lender or broker. Furthermore, non approved brokers may not be compensated by anybody other than the borrower and cannot receive yield spread premiums. This is as much for the safety and best interest of the borrower as it is FHA.
Of course, NAMB applauds the FHA Direct Endorsement Lender Participation Act which allows their members to circumvent FHA guidelines in order to originate loans and receive undisclosed yield spread premium payments from lenders without meeting FHA’s approval criteria. You can view NAMB’s press release here.
According to NAMB President, George Hanzimanolis:
“If signed into law, this is a victory for all consumers who need access to the FHA program to refinance into a more affordable loan”. “We thank Representatives Miller, Sherman and Baca for their leadership in addressing the importance of making FHA programs more available to homeowners.”
Well, that sounds all well and good until you realize that NAMB is consumer enemy #1 by opposing RESPA compliance, disclosure of yield spread premiums by mortgage brokers, and mortgage broker fiduciary duty. NAMB also opposes mortgage broker disclosure of relationship and duty. Is this really the organization you think should be the spokesperson for what is best for consumers?
Reps Miller, Baca, and Sherman are openly and notoriously cowing to special interests to the detriment of the FHA program and the public that they serve. This is an obvious breach of civil duty and a complete outrage that they would seek to compromise the integrity and solvency of the FHA program by circumventing necessary minimum approval standards.
Of all the colossally bad ideas that have been tossed around of late, this is an award winning worst. FHA approval criteria is there for a reason, and allowing non approved entities who have not been adequately screened by FHA to originate, process, and close loans in their name is an invitation for trouble and abuse.
3 Responses to “Reps Gone Wild: New Act Seeks to Eliminate FHA Approval Requirements”
Commenting on your statement that the Reform which would allow non-FHA approved brokers and lenders an easier road to approval is erroneously depicted by you as nothing but “trouble”. The Reform does not negate approval, it merely opens the doors to shops (like mine, for instance) who do not meet the minimum “wherewithal” (i.e. financial) requirements and setting aside costly audited financial statements. There is still a process and approval procedure. It is not money that should govern over whether or not a broker can be approved to write FHA loans which is the reality of the current approval process. My loan officers and this office are the very people you WANT to be able to help borrowers — because we have integrity and honesty and genuinely “serve” the people in our State. We should not be prohibited because we are not of a certain financial “value”; nor should the broker down the street be approved because he is. I applaud this attempt to even out the approval process so that some of us smaller “good guys” can write these loans.
By CArmstrong on Jul 30, 2008
Hi CArmstrong. I agree totally!! see my recent post and I think you will agree with me. . . it is absolutely unfair!! Your right when you say. . yeah the guy down the street (that has all the money/assets was the one that took “his” clients your local community to the cleaners and that’s why he has the funds . . oh yeah and guess what . . .?? oh no. . the consumer paid for it !! Why can’t they look at someone that has been in the business for 17 years. . why can’t we be grandfathered in?? The State of Oregon did their audit of my files and books (not because they were called but because they were seeing all the broker’s in the state to see how they operate. . The state loves me. . they can see that I am ethical . . fair. honest. . when I priced a loan they were almost always given the rate they first qualified for and barley a YSP on the back because heaven forbid I would have to extend their lock. . . and all of those things that make a good broker. . .How would HUD feel if they came unannounced into some of these offices and do an audit. . . maybe they would rethink this and know that no one is policing these people. . Regards, Angela
By Angela Adams on Aug 15, 2008
CArmstrong and Angela, while I appreciate your situation, what H.R. 6254 proposes is not “reform” but moreover, an elimination of essentially all approval requirements which could cause considerable exposure to the FHA program, consumers, and taxpayers.
At a time when the economy and industry are being decimated due to irresponsible lending practices, you suggest eliminating all approval standards and opening up the program to an industry that lacks effective regulation, education, or licensing? Just so individuals and companies who are insolvent and have no skin in the game can have unadulterated access to FHA?
You really want the same companies that purchase trigger lead and specialized in option ARMS and subprime loans to have unqualified access to a taxpayer funded program? (and yes it is taxpayer funded because the program will require a 1.2 bil subsidy to begin fiscal ‘09 according to FHA Commissioner Montgomery).
While I agree FHA should implement educational requirements and testing, these should be in addition to existing requirements. However, H.R. 6254 doesn’t seek to replace or enhance requirements, but moreover, to remove approval requirements entirely on a “temporary” basis. H.R. 6254 calls for allowing brokers to participate upon filing an application without the application even being reviewed or accepted by HUD.
Considering that since non approved brokers can participate as borrower agents, perhaps a more reasonable focus would be in facilitating borrower agents and “advisors” rather than compromising the integrity of the FHA program.
By Do_the_math on Aug 15, 2008