Posts Tagged ‘mortgage’

Signed, sealed & delivered mortgage fraud Bill

Two bills designed to address some of the problems arising from the economic crisis have been signed by the Obama President. The first deals with mortgage fraud and the other with aid to families who are involved in a situation of exclusion guard their homes.

Look for artists of the scam, the order of the new law on mortgage fraud means seriously. Half billion federal dollars has been allowed to spend on targeting mortgage fraud charges. Agencies such as the secret service, the Postal Service United States and HUD all obtained funds to increase their additional security measures.

The fraud enforcement and Recovery Act now sanctions on the Government to prosecute companies or individuals currently out of reach. Currently, an incidence of mortgage fraud can result in investigation, prosecution, civil penalties and imprisonment at the federal level, which is opposed to the previous gentler State sanctions applied previously. This new law applies to all types of mortgage fraud, no matter how minor the offence.

In the past, these schemes defrauded by home owners, real estate, lenders and builders of billions of dollars each year. The FBI intends to send a message that mortgage fraud will not be tolerated and it is expected that the criminals will receive stiff penalties in order to set an example for others.

The second draft law, simply entitled, “Helping families save their homes Act” aims to simplify the process owners receive financing of exclusion and modifications of existing loans. Also makes it easier for the lender to offer these types of options and hopefully avoid an imminent exclusion.

The new law also provides protection for tenants who live in a household whose owners face exclusion. Under the old rules, the tenants would have to happen immediately after the exclusion, they now have the option of continuing the rent for a period negotiated with the lender. This makes sense on many levels. Now hundreds of families who otherwise would have found on the street, still have houses. Lenders no longer have to deal with the problems associated with the maintenance of an empty House. Let us hope that this will reduce occurrences of neighborhoods awarded houses sitting vacant and Repair complete patient and vandalism. In many cases, reliable tenants are happy to stay and keep the property.

The law provides extra help for homeless, makes better use of local organizations in this role and allowed more latitude to allocate federal funds for assistance.

Part of the reason that fraud mortgage became in so widespread was attributed to the lack of a vigilant only affiliation to oversee the loan of the lagoons, insurance and loans schemes bids. Instead there was a series of small agencies, each view of only a part of the problem, but not single unit had the power to actually address the issue as a whole. Currently, the administration of Obama has a plan in the works to establish a federal agency designed to monitor all the participants; the small corridors to the main lenders.

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THERE have been changes in federal rules covering how mortgage brokers are paid, and while legal challenges to them persist, the question now is how the new system will work in practice.

Regulators and consumer advocates say borrowers are bound to benefit. Broker trade groups say their industry will shrivel and consumer costs will go up.

Mortgage brokers are middlemen who work with multiple lenders to arrange home loans for customers. They say they add value by helping borrowers find the best deal; their detractors say they add costs that have been hidden in complex fees.

The business has contracted significantly in the last five years. In 2005, during the real estate boom, brokers accounted for 31 percent of mortgages originated, according to Inside Mortgage Finance, a trade publication. Last year it was just 11 percent, and the market was only half as big.

Brokers used to be compensated by a mix of borrower-paid origination fees and lender-paid fees. The most controversial was a “yield spread premium,” paid by lenders when a broker placed a borrower in a loan that charged higher interest than other loans. The justification was that higher rates allowed lower upfront closing costs. The criticism was that the premiums were an incentive to push expensive loans and that the system contributed to a flood of risky loans and thus to the financial crisis.

In response, the Federal Reserve put out rules that prohibit loan originators from being paid by both the borrower and lender on the same deal, and also barring commissions based on anything other than loan size. The rules were set to take effect April 1; two trade groups sued, delaying enactment a few days before a federal appeals court allowed it. Both the National Association of Mortgage Brokers and the National Association of Independent Housing Professionals say they will keep pressing their lawsuits.

On the front line, the problem is that there has been “no clear guidance” on exactly how to arrange commission structures for employees who originate loans, said Melissa Cohn, the president of the Manhattan Mortgage Company, a loan brokerage firm.

“To be honest with you,” she said, “in some cases it’s going to create higher-priced mortgages.” Although the spirit of the law is to protect borrowers, she added, “the reality of it is it’s just going to cause more confusion.”

Mike Anderson, the director of the National Association of Mortgage Brokers, speaking just two days after the rules went into effect, said: “It’s already happening. Rates have already gone up; fees have gone up.” Mr. Anderson, who is also a broker in New Orleans, cited situations in which brokers could no longer cut fees to make deals go through, and others in which banks were raising charges. “The rules basically pick the winners and losers,” he said, with the winners being the big banks. “The losers are the small businesses.”

The Facebook page of the National Association of Independent Housing Professionals is full of complaints from what appear to be mortgage brokers saying the rules will hurt their business, and recounting how unnamed lenders have raised prices.

Despite industry opposition, the change is a victory for borrowers, according to representatives of the Center for Responsible Lending, an advocacy group long critical of the yield-spread premium system. Borrowers “should be getting more honest services from the originator they’re working with,” said Kathleen E. Keest, a senior policy counsel, “because that originator is no longer going to have a conflict of interest if they put a borrower in a loan with a higher interest rate or riskier terms.”

“If people were saying that the way things worked, worked well,” she added, “that’s one thing, but it’s very clear the way things worked before didn’t work for anybody. The notion we need to have the same rules is denying what happened. It’s denying that the way the market was working was disastrous for everybody.”

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