Mortgage Bill Needs Upgrade

The Washington Times (Washington, DC), November 16, 2007 | Go to article overview

Mortgage Bill Needs Upgrade


Byline: Henry Savage, SPECIAL TO THE WASHINGTON TIMES

I have to chime in and express my views on the proposed "Mortgage Reform and Anti-Predatory Lending Act," introduced by U.S. Rep. Barney Frank, Massachusetts Democrat.

I've spent more than 20 years in the mortgage business as a consumer advocate, so I believe my opinions on the bill are qualified and justified.

The bill contains three sections.

The first addresses steering, which is the practice of directing business for personal gain to a particular entity that may not be in the consumers' best interest.

Specifically, the bill calls for the elimination of the so-called "yield spread premium" (YSP). Sometimes called "negative points," this is actually a fee, paid as a percentage of the loan amount, to the mortgage broker.

In exchange for a YSP, the lender receives a higher interest rate, hoping to recoup the YSP over time through the higher interest.

Mr. Frank considers a YSP to be a tool of steering. While there may be many unscrupulous and unethical people in the mortgage business that, indeed, may push borrowers into loans with higher rates in order to reap a YSP, the notion of eliminating YSPs altogether is absolutely akin to curing dandruff by decapitation.

I've been writing this column since 1996 and have written about the so-called zero-closing-cost refinancing program dozens of times. The concept is simple: In exchange for a slightly higher interest rate, usually about 0.25 percent, the borrower can refinance his mortgage and pay zero points and zero transactional costs.

The analysis is even simpler: If a borrower's current rate is higher than the rate offered with no closing costs, it makes sense to refinance. Any interest savings is immediate because there are no fees to recoup.

Since 1992, my company has refinanced thousands and thousands of area homeowners - the vast majority of these folks opting for the higher-rate zero-cost option. These folks choose the higher rate, no-fee program for a reason: It's a better deal than taking a lower rate that carries thousands in nonrefundable fees.

The elimination of the YSP would prevent independent mortgage companies from offering zero- and low-cost financing options. As far as I understand it, big banks would still be able to offer such of programs, but seeing as mortgage brokers account for 65 percent of all mortgage business, the availability of these programs would be curtailed and perhaps completely unavailable.

The reduction of supply will diminish competition and adversely affect consumers.

The first section also addresses licensing for all individual loan originators. I'm fine with this. We need to weed out the crooks and incompetents, but let's hope licensing applies also to originators who work for banks, not just brokers. In my experience, there are plenty of inept loan officers who work for banks and independent brokers.

The second section the bill addresses the ability of a borrower to repay. While I almost laugh at the notion, because I have never recommended any loan to a client whom I didn't think could repay, it's pretty obvious that a lot of homeowners took out loans that they can't afford. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Mortgage Bill Needs Upgrade
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.