FAMB Government Affairs Update
September 13, 2005

Dates to Remember

Please mark these important dates on your calendar.

March 13 – 15, 2006 – FAMB’s Tallahassee Lobby Days. March 14 is the day Mortgage Brokers will visit their Tallahassee Legislators at the Capital and that evening FAMB will hold a reception for our Legislators at the Governors Club. These dates are shown on the FAMB WEB page.

March 26 – 29, 2006 – NAMB’s Washington DC Legislative Conference. Wednesday, March 29, will probably be the day Mortgage Brokers will visit their Washington Legislators at the Capital

Small Business Health Fairness Act

Here is an e-mail report from Valerie Saunders on the success of FAMB’s requests to contact U.S. Senators about the need to vote on the Small Business Health Fairness Act.
Florida Mortgage Brokers continue to do their share to move this important legislation forward.

Hi everyone,

Here is an update regarding the Small Business email which was sent out on Friday. As of 4pm, Monday we have had 110 unique clicks on to cap wiz to generate an email to our Senators. The information will continue to run in Friday's and September 30th's Focus newsletters.

Thanks,

Valerie Saunders

HUD Settles Case against Coldwell Banker for paying Referral Fees to Sales Agents - Coldwell Banker accused of giving gifts and other benefits to referring agents

The Department of Housing and Urban Development announced a $250,000 settlement with Coldwell Banker Residential Real Estate, Inc. for violations of the Real Estate Settlement Procedures Act (RESPA). HUD asserted that Coldwell Banker's Atlanta real estate brokerage offices paid higher sales commissions and offered gifts and other incentives to its sales agents for referring business to an affiliated title company.

Coldwell Banker Residential Real Estate, Inc. maintains an ownership interest in Regency Title Company in the Greater Atlanta area. After a year-long investigation, HUD found that Coldwell Banker Residential Real Estate, Inc. offered its sales agents incentives including trips, Atlanta Braves baseball tickets, and agent-of-the-month ads in local newspapers based on the number and volume of referrals to Regency Title. In addition, HUD discovered that certain agents who referred business to Regency Title received higher sales commissions or were paid immediately at time of closing.

"Clearly, when companies create incentives and base compensation on referrals by their real estate sales agents to their affiliated businesses, that's against the law," said Brian Montgomery, HUD's Assistant Secretary for Housing-Federal Housing Commissioner. "HUD is taking a serious look at affiliated business arrangements to make certain that business practitioners don't blur the line between legitimate relationships and those based on kickbacks and referral fees."

The Real Estate Settlement Procedures Act was enacted in 1974 to provide consumers advance disclosures of settlement charges and to prohibit illegal kickbacks and excessive fees in the homebuying process. Section 8 of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business.

Report Out This Month on 2004 HMDA Data

A consolidated report on 2004 Home Mortgage Disclosure Act data is expected this month from federal regulators, and two Federal Reserve Board economists will also release an analysis of what that data means.

That analysis would act as a supplement to and seek to explain further the HMDA data. It will be prepared by two of the Fed’s top economists, Glenn Canner and Robert Avery, and is expected to address credit scores.

Mortgage lenders with at least $34 million in assets who make a certain number of mortgage loans per year are required to collect data on mortgage loan/application registers to show the race, sex, income, ethnicity and other data regarding loan applicants and the properties they are purchasing.

Bankers in particular are concerned about the coming analysis, particularly in light of a pre-existing controversy stemming from HMDA data on individual banks that was released in April. Banks said the findings, which show a relationship between higher loan prices and minorities, are due to risk-based pricing and not discrimination, the article said.

Regulators may be paying close attention to the report’s findings while Fed officials will be using the data as a test to decide “which lenders require closer scrutiny during exams.”

Prior to last year, lenders were required to report only the number of loan denials by race, gender, and income. Starting in 2004, lenders were required to add how many high-cost loans went to each type of borrower.

Other Legislative and Regulatory Issues

These issues include: RESPA Reform, Fannie Mae and Freddie Mac Reform, Small Business Health Fairness Act, Predatory Lending Legislation, Affiliated Business Arrangements and Fair Labor Standards.

1. RESPA Reform Proposals from HUD – After simmering for a little over a year, HUD has turned up the heat on RESPA Reform.

· Bye-Bye Till Next Year? This thought is from the National Mortgage News …
Hurricane Katrina has pushed RESPA reform off the front burner, and the Department of Housing and Urban Development may not be able to issue a reform proposal until next year. "The hurricane interrupted some of those activities," HUD Deputy Assistant Secretary Gary Cunningham told a Mortgage Bankers Association compliance conference in Washington. For the past two weeks, HUD's all-consuming priority has been finding temporary housing for persons displaced by the hurricane and flooding. After concluding four Washington roundtables on Real Estate Settlement Procedures Act reform on Aug. 25, HUD officials were hoping to take stock of the input provided by industry and consumer groups when Katrina stuck the Gulf Coast on Aug. 29. Mr. Cunningham said HUD wants to issue a proposed rule for review and comment to keep the RESPA process moving. However, he indicated that it is unlikely HUD will be able to issue a proposal by year-end.

2. Reform of Fannie Mae and Freddie Mac, also known as GSE Reform – H.R. 1461 and S. 190 Legislation may limit access by Mortgage Brokers to Fannie Mae and Freddie Mac automated underwriting systems. Mortgage Brokers rely on these systems to quickly assess a mortgage application and provide consumers with mortgage credit.

· Office of Federal Housing Enterprise Oversight Sets Final Rule on Mortgage Fraud Reporting

A final rule requiring Fannie Mae and Freddie Mac to report mortgage fraud and suspected fraud was published by the Office of Federal Housing Enterprise Oversight with an effective date of Aug. 29.

Under the final rule, the government-sponsored entities must “promptly” report fraud, and to do so by phone or electronic communication if the information requires immediate attention. This applies to mortgages being purchased by Fannie and Freddie as well as mortgage-backed securities. Having made a report, the entity is barred from disclosing the fact of the report to the party involved without prior written approval of OFHEO’s director.

The final rule defines mortgage fraud to cover misinformation relied upon by a GSE to fund or purchase a mortgage, mortgage-backed security or similar instrument.

3. Small Business Health Fairness Act – (S. 406 and H.R. 525) - The Small Business Health Fairness Act is Federal Legislation that has passed the U.S. House of Representatives and is awaiting action in the U.S. Senate. This legislation will allow small businesses and the self-employed obtain group insurance through their trade associations. If passed, this legislation will give Mortgage Brokers and other small businesses access to another source for Health Insurance.

The U.S. Senate plans to adjourn its business for the year on September 30. If they are to pass the Small Business Health Fairness Act this year, they must take action in September.

Contact your U.S. Senators and ask them to vote on The Small Business Health Fairness Act in September 2005.

4. Responsible Lending Act – (H.R. 1295) This legislation was introduced by Reps., Bob Ney, R- Ohio, and Paul Kanjorski, D-Pa., to protect consumers against predatory lending practices through revisions to federal statutes affecting lenders, brokers and appraisers.

This legislation includes provisions that will increase the number of loans considered as section 32 (High-Cost Loans) and provides for a Federal Registry for only Mortgage Brokers.

5. Affiliated Business Arrangements, ABAs and One Stop Shops – This issue involves the legality of homebuilders requiring or inducing homebuyers to use mortgage companies affiliated with the builder.

6. The U.S. Department of Labor Administers the Fair Labor Standards Act – and its affect on compensation to commissioned mortgage employees.

Tom Morcom
FAMB Government Affairs