Not long after reading the article in the Press-Telegram about Washington Mutual filing to rescind the foreclosure on Congresswoman Laura Richardson’s property in Sacramento, I was reading e-mails from the California Association of Mortgage Brokers (CAMB) and the National Association of Mortgage Brokers asking me, and other mortgage brokers, to please go to the HUD website and make comments about the proposed changes to the Real Estate Settlement Procedures Act (RESPA). You see, HUD is once again proposing drastic changes to RESPA that will affect mortgage brokers, affect to the extent that it may make our industry extinct. Also pending are several pieces of legislation in Congress that will impact mortgage lending and banking in this country. Interesting, major legislation before Congress that will impact major lenders and banks—like, let’s say WAMU—and major regulatory changes from HUD that would be detrimental to mortgage brokers and beneficial to major lenders—like, let’s say WAMU.
Foreclosure rescission is extremely rare, especially if the lender who foreclosed has sold the property. Why is Washington Mutual filing to rescind the foreclosure of a United States Congressional Representative? How many other foreclosure rescissions has WAMU filed in the past year and how many total foreclosures have they processed? My guess is that they have filed very, very few, if any, rescissions in California—if any. While this may very well be all on the up and up, it does seem too coincidental that at a time with major legislation that will affect WAMU’s business pending in Congress that it files to rescind Richardson’s foreclosure.
Regarding the RESPA changes being proposed, essentially HUD is looking to impose on mortgage brokers onerous and duplicative disclosure rules on brokers that will not be applied to banks and direct lenders. By doing this HUD can appear to be addressing the scapegoat of the mortgage crisis while ignoring all the other players involved. HUD’s reasoning is that if mortgage brokers disclose more than we are already required to disclose, it will prevent future borrowers from entering “bad loans.” The problem is there already is on the books plenty of disclosures we have to make to borrowers—more so in California than other states—to inform borrowers of the loan terms, program changes if any, rates and costs of the mortgages for which they are applying and for which they are signing loan documents. Adding additional pages of disclosure to a process that already includes a loan application package of over twenty-five pages and loan document packages around one hundred pages will not mean borrowers will be any more likely to read the paperwork. As well, bad brokers who fail to provide disclosure information will continue to not provide the new disclosures.
As is usual when regulatory bodies become interested in “consumer protection,” they miss the mark and consumers end up paying more for the products and services being regulated. In this case, by diminishing—or possibly eliminating—the mortgage broker industry, HUD is eliminating competition and reducing the number of sources borrowers will have for mortgages. This means the major lenders, i.e. the WAMUs, will have less competition and be able to charge higher rates and fees to applicants and borrowers. In California the mortgage brokers have for the past decade been responsible for originating and funding 70-80% of the mortgages. Yes, there are bad mortgage brokers, like there are bad lawyers, bankers and politicians; but the overwhelming majority of us are good. We work hard, we help families with the purchase of the first, second, third homes as their families grow.
Our industry is working hard to resolve the mortgage and housing issues in our communities and hope to continue to support families with their home purchases and mortgage management. With the influence of major lenders like WAMU, HUD and Congress are poised to change our ability to continue with our work.
Coincidence with so much on the line that WAMU would file to rescind a Congresswoman’s foreclosure? Maybe. Of course some people think it was a coincidence that while still a member of City Council, Richardson put forth the hotel labor ordinance requiring labor union contracts at some hotels in Long Beach and subsequently the number one sector of campaign contributors for her various campaigns have been labor unions.
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