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It is being reported that Senate Bill 3217 Restoring American Financial Stability will soon pass out of the Senate. There are many things in this bill which will effect the mortgage industry. In an earlier blog post I discussed the likely impact of the "Skin in the Game" provisions of this bill. In this post, I will discuss the provisions in this bill which will restrict Loan Officer compensation. Glen Corso, Executive Director of The Community Mortgage Banking Project, discussed on the BlogTalkRadio/Lykken-on-Lending show on Monday that the amendment to Senate Bill 3217 which, among other things, prohibits loan originators from receiving compensation based on the terms of the loan. He explained that the amendment was introduced late Tuesday evening May 11th and was passed on Wednesday morning May 12th, giving himself and other industry advocates no chance to weigh in on the amendment. The intent of the amendment is to remove any incentive for an originator to charge more in origination fees to a borrower or to give a borrower a higher mortgage rate than the basic rate and price as established by his or her origination company. So this amendment essentially prohibits companies from paying loan officers a [...]
Senate Bill 3217 Restoring American Financial Stability was the focus of discussion on the show Monday, particularly two recently passed amendments which are of great interest to the mortgage banking industry. The amendments deal with risk retention and loan officer compensation. One is good for the industry and the other is not. Glen Corso, Executive Director of The Community Mortgage Banking Project, joined the show to bring a first hand understanding of the amendments and their status. The amendment that is good for the mortgage industry deals with the risk retention provisions of the original bill. The original bill would have required mortgage originators to retain “skin in the game. It would have required originators to retain 5% of the risk on all the loans they originated and sold to investors. The amendment exempts from the 5% risk retention requirement certain mortgage loans which meet the definition of Qualified Mortgage Loans. Since 90% or more of today’s loans will meet the definition of Qualified Mortgage Loan, the amendment significantly reduces the number of loans on which originators will be required to retain risk. The amendment that is not good for the mortgage industry restricts how loan originators are to be [...]
MBS prices were volatile last week and fell about half a point during the week. Most of the push for MBS prices lower came from weak Treasury auctions. On Wednesday the 5 Yr Treasury Note received lower than usual demand, especially from foreign investors, and the yield required from the bidders was higher than the previous trading range. The weakness in the Treasury auction spilled over to the MBS market. The economic data released during the week was mixed with Durable Orders better than expected and the housing data was a little weaker than expected. All of the focus in Congress now that Health Care has passed seems to be with the Restoring American Financial Stability Act of 2010. This proposed law will have sweeping changes for the mortgage industry, if passed. It includes the creation of a new regulator for consumer protection, retention of 5% of the risk on loans originated and then sold, and increased HMDA reporting requirements, among other things. This 1300 page bill seems to be on a fast track. Discussion continued on the risks and benefits of converting a mortgage company’s operations from a best efforts delivery of loans originated to a mandatory delivery. The [...]