Tag Archives: Senate

Happy New Year 2014!! Ringing in the NEW and extending the OLD….

Will the Federal Mortgage Debt Relief Act be extended for another year in 2014?

Yes. The Mortgage Debt Relief Act (MDR) will be extended. The National Association of Realtors (NAR) is working with the lawmakers to get the MDR extended for at least another year. Here are the details for you: Continue reading

A closer look to be taken at nonbank mortgage lenders

The Consumer Financial Protection Bureau Wednesday disclosed key details about how its examiners will size up mortgage companies that aren’t banks but still offer home loans to consumers, noting it will be leaning on other regulators for help as it embarks on the enormous task of reviewing thousands of nonbank lenders.

The details are crucial given that the consumer watchdog agency, through a supervision program it launched last week, is preparing to bring many of the nation’s nonbank financial companies under federal supervision for the first time.

Consumer Financial Protection Bureau - CFPBThousands of nonbank financial firms are not chartered as banks but still offer mortgage, student and payday loans, and many have faced only light federal scrutiny. The sector has faced criticism from consumer advocates and other groups who say some home lending practices by the nonbank sector contributed to the recent financial crisis.

The consumer bureau noted Wednesday the sector is indeed “a significant part of the mortgage market” that included many of the largest subprime lenders during the housing bubble.

“The mortgage market cannot work well for consumers if the spotlight shines only on one part of it, while the rest is left in darkness,” said the consumer bureau’s director Richard Cordray. “Our supervision program will illuminate the entire marketplace by making nonbanks play by the same rules as the banks.”

The bureau’s new “Mortgage Origination Examination Procedures” guide released Wednesday makes clear the bureau’s examiners will be conducting broad reviews of nonbank mortgage lenders’ business practices and the agency will be coordinating with state regulators and other federal agencies.

Consumer bureau staffers will be examining the companies’ volume of business as well as the types of products and services the firms are offering. Also, the bureau will be evaluating lenders’ advertisements and marketing practices as well as closing practices, another indication that just about every part of a firms’ business model will be under review.

The goal will be to assess whether nonbank mortgage lenders and brokers are in compliance with financial laws.

But the bureau also made clear that, unlike other banking regulators, the watchdog has another focus: identifying risks to consumers.

The bureau, created by the 2010 Dodd-Frank financial overhaul law to root out fraudulent financial practices thought to have contributed to the recent financial crisis, had already been supervising some of the nation’s largest banks. But its powers to oversee nonbank lenders didn’t kick in until last week, when President Barack Obama recess-appointed Cordray as the bureau’s first director. Cordray has said the agency will move forward on programs and probes despite concerns about how the president bypassed the Senate to install him as the agency’s chief.

This article is by the Wall Street Journal, viewable here: “New Bureau Plans Close Look at Nonbank Mortgage Lenders.”

Factoring energy efficiency into a home’s value

Under the SAVE (Sensible Accounting to Value Energy) Act, estimated energy-consumption expenses for a house would be included as a mandatory new underwriting factor.

When you apply for a mortgage to buy a house, how often does the lender ask detailed questions about monthly energy costs or tell the appraiser to factor in the energy-efficiency features of the house when coming up with a value?

Hardly ever. That’s because the big three mortgage players — Fannie Mae, Freddie Mac and the Federal Housing Administration, which together account for more than 90% of all loan volume — typically don’t consider energy costs in underwriting. Yet utility bills can be larger annual cash drains than property taxes or insurance — key factors in standard underwriting — and can seriously affect a family’s ability to afford a house.

energy efficientA new bipartisan effort on Capitol Hill could change all this dramatically and for the first time put energy costs and savings squarely into standard mortgage underwriting equations. A bill introduced Oct. 20 would force the three mortgage giants to take account of energy costs in every loan they insure, guarantee or buy. It would also require them to instruct appraisers to adjust their property valuations upward when accurate data on energy efficiency savings are available.

Titled the SAVE (Sensible Accounting to Value Energy) Act, the bill is jointly sponsored by Sens. Michael Bennet, a Democrat from Colorado, and Johnny Isakson, a Republican from Georgia. Here’s how it would work: Along with the traditional principal, interest, taxes and insurance (PITI) calculations, estimated energy-consumption expenses for the house would be included as a mandatory new underwriting factor.

For most houses that have not undergone independent energy audits, loan officers would be required to pull data either from previous utility bills — in the case of refinancings — or from a Department of Energy survey database to arrive at an estimated cost. This would then be factored into the debt-to-income ratios that lenders already use to determine whether a borrower can afford the monthly costs of the mortgage. Allowable ratios probably would be adjusted to account for the new energy/utilities component.

For houses with significant energy-efficiency improvements already built in and documented with a professional audit such as a home energy rating system study, lenders would instruct appraisers to calculate the net present value of monthly energy savings — i.e., what that stream of future savings is worth today in terms of market price — and adjust the final appraised value accordingly. This higher valuation, in turn, could be used to justify a higher mortgage amount.

For example…

Read the rest of this article is by the Los Angeles Times: “Factoring energy efficiency into a home’s value“.