FRB Chairman Ben S. Bernanke’s Comments on Delinquency Rates

Filed under: Foreclosure — admin @ 10:36 pm

Ruth Lee

I thought it would be interesting to share FRB Chairman Ben S. Bernanke’s Comments on Delinquency Rates and the Federal Reserve’s Homeownership and Mortgage Initiatives given in a speech at the Columbia Business School’s 32nd Annual Dinner on May 5.

The following graphics show comparisons of delinquency levels between 04-07:

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Why Bankers Don’t Disclose SRP - Part Two

Filed under: SRP, Warehouse Line Lending, YSP — admin @ 9:00 am

Ruth Lee

Continued from Tuesday … read part one here. 

For the purposes of this blog, we won’t discuss the differences in flow, mandatory, or bulk sales and their relevance to determining SRP.  We will stick to the fundamentals of “retail” comparison.  If the argument is disclosure of SRP, it should be easier to focus on comparing those two types of transactions in their retail sense. 

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Why Bankers Don’t Disclose SRP - Part One

Filed under: SRP, Underwriting, YSP — admin @ 12:12 pm

Ruth Lee

Brokers have been required to disclose YSP (yield spread premium) on the HUD and GFE to their borrowers for years now, while bankers are not required to disclose their SRP (service release premium).  The argument has been bantered around for years by brokers that this creates an unfair playing field and that bankers should be required to disclose SRP to create parity. 

This piece will attempt to explain the fundamentals of why it is not possible to disclose SRP; however it makes no attempt to address the debate on the clarity, equity , or illumination of YSP disclosure.  Ideally, both sides will gain greater clarity of how to address the issue without throwing out a red herring, like bankers disclosing SRP, and deal with the broader issues needed to effect real changes in consumer protection, parity in opportunity and mortgage reform.

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The White House and Current Mortgage Reform Legislation - Part 2

Filed under: HR 3221, HR 5830, Mortgage Industry Legislation — admin @ 11:00 am

Ruth Lee

As I said yesterday, the Bush Administration has indicated that they understand that HR 3221 will be amended on the Senate floor to include some text from S 2636 and it is the White House’s position to oppose and veto such legislation if passed.

The White House has indicated they will veto legislation with the following provisions:

• From S 2636, provision funding $4b in assistance to state and local governments for the redevelopment of abandoned and foreclosed properties.

o    Seen as too exepensive, a bailout to investors and speculators, may cause the market to take longer to recover.

• From S 2636, provision tripling the funding of Neighborhood Reinvestment Coalition NRC

o    Seen as unnecessary and taxing the ability of the NRC to administer services.

• From S 2636, provision modifying bankruptcy code to allow judges to modify loan terms

o    Seen as undermining existing contracts
o    Seen as possibly leading to the contraction of mortgage credit availability and affordability.

In my opinion, the provision to really look at is the modification to the bankruptcy code.   Unfortunately, the previous modifications to the bankruptcy code sought to allow consumer credit to have par relevance and priority as mortgage debt. The exception was removed in 2005; but it had been in place since the last major bankruptcy overhaul in 1978.  That exception made home loan lenders a favored class of creditors and originally was intended to encourage mortgage lending.  Provisions allowing judges to modify terms will not only make them an unfavored class; but have a potentially chilling effect on mortgage investment.

The White House and Current Mortgage Reform Legislation - Part 1

Filed under: HR 3221, HR 5830, Mortgage Industry Legislation — admin @ 11:04 am

Ruth Lee

The two most relevant pieces of mortgage reform legislation to date are:  FHA Housing Stabilization and Homeownership Retention Act of 2008 (H.R. 5830) and The Foreclosure Prevention Act of 2008 (H.R. 3221).   It is understood that HR 3221 will be amended on the Senate floor to include some controversial provisions from S 2636 put forth by Majority Leader Reid.

The Administration has indicated what they will and will not support.  Text of the White House response on mortgage reform legislation from 02/28/08 is here.

The Bush Administration has indicated that they understand that HR 3221 will be amended on the Senate floor to include some text from S 2636 and it is the White House’s position to oppose and veto such legislation if passed.

The White House is in favor of the following:

• Modernizing FHA:  FHA SECURE
• Hope Now Alliance whose Mission Statement is to “Maximize the preservation of homeownership while minimizing foreclosures. Assist borrowers who have the willingness and wherewithal to remain in their homes, but need some help to do it. Our goal is to keep people in their homes and when that is not possible, prevent foreclosure.”
• Reformation of regulatory oversight of GSE’s
• Increased funding for housing counseling
• RESPA reform – no details, just RESPA reform
• Authorizing the FRB to implement their Blueprint to improve mortgage disclosure requirements
• Developing of new standards for deceptive and unfair trade practices under HOEPA authority
• The FRB developing regulations to manage underwriting standards and criteria

To be continued…