Feldman Law Center – News by Feldman Law Center — Part of Obama’s plan to overhaul regulation of the mortgage industry, unveiled last week, would create a Consumer Financial Protection Agency to monitor consumer financial products and change the entire process of getting a mortgage. With a stated goal of developing a mortgage process that is as simple as signing up for a retirement plan, the President’s proposal centers on an automatic offering of a “plain vanilla loan” to potential homebuyers. These loans would offer fixed interest rates and 30 year maturities, unless the borrower opts for a loan with riskier terms such as interest only or adjustable rates.
The plan has received vehement opposition from the mortgage and banking industries who say that government-approved mortgages would restrict borrowers’ options, make loans harder to get, and make them potentially more expensive. Powerful trade groups like the American Bankers Association, for example, oppose creating a consumer financial protection agency. Even lobbying groups open to the idea of a consumer-products regulator question whether the government should suggest which mortgages are best for consumers. “We don’t want to stifle innovation, and we don’t want to stifle competition,” said John Courson, president of the Mortgage Bankers Association.
One thing that would definitely be restricted, and one of the main factors behind these groups’ opposition to the plan, will be the potential commissions that mortgage brokers can charge when they sell a mortgage. For example, administration officials want to curb the fees that brokers and lenders receive tied to inflated mortgage rates. Brokers argue the incorporating those fees are a way for borrowers to amortize the costs of a loan without having to come up with thousands of dollars in closing costs. Another aspect of the plan would link compensation to whether the borrower ends up defaulting on the mortgage. “There’s no reason that we should have to assume that risk,” said Marc Savitt, president of the National Association of Mortgage Brokers. The group’s stance is that while a mortgage broker can facilitate a loan, the ultimate approval for the mortgage comes from the lender.
Mortgage brokers’ fees were typically highest on the most creative and dangerous of the mortgage varieties. With those mortgages a thing of the past, volume, commissions, and their share of new business has dwindled. Mortgage brokers’ share of new loans has dropped from a high of 60% to the current 20%, on much lower volume. Fixed rate mortgages have increased from a low of 50% of the total of new loans originated in 2004-05 to 95% today.
As the plan stands now, the newly created agency would approve a set of mortgages including fixed and adjustable rate mortgages. Approval for vanilla mortgages would be similar to the “prime mortgage” approval process. Potential home buyers could still get mortgages outside of the government approved versions but disclosure of risks and dire warnings will accompany them.
Supporters of the new regulatory agency say that it is needed as much to protect borrowers from themselves as from predatory lending practices. Many borrowers went through the process of getting their mortgage without ever taking the time to understand exactly how the loans they were applying for worked and where the risks were. Still, previous Congressional efforts to regulate the mortgage industry have consistently broken down over the years, even on simple issues such paperwork reduction, so the fight could be long, drawn out, and years in the making.
About Feldman Law Center
The Feldman Law Center is one of California’s top loan modification companies, providing excellent service to our clients and is completely focused on keeping everyone one of our clients in their homes. Our loan modification experts work tirelessly to provide every homeowner we work with the information, guidance and support they need to modify their mortgages and keep the homes they’ve worked to buy.
About Loan Modifications
If you’re unfamiliar with what a loan modification is, a mortgage loan modification is quite possibly the most effective tool you can utilize if you are behind on your mortgage, and are in the midst of a financial hardship, in order to save your home from interesting foreclosure. A loan modification is literally is a process where the terms of a mortgage are modified outside the original terms of the contract agreed to by the lender and borrower (i.e mortgagor and mortgagee). In general, any loan can be modified. The Feldman Law Center knows every law in California (and the country) that may be able to keep you in your home. Lenders would rather renegotiate the terms of your loan, and possibly even negotiate a principle reduction, than let the house go into foreclosure.
With years of experience negotiating with lenders, as well as years of experience keeping people in their homes, the Feldman Law Center is one of the most experienced loan modification firms in all of California. To learn more about loan modification programs and loan modification process visit Feldman Law Center at www.feldmanlawcenter.com or call 800-588-0425.
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