HR 4173 Dodd-Frank Wall Street Reform Bill Signed into Law

This new law directly impacts mortgage availability and you should know about it. The actual bill is over 2100 pages long but there is a concise overview of the new law on one of my favorite sites; http://opencongress.org . I have written about this site before as a great informational source.  At the end of this post is information about opencongress.org.

A synopsis of the bill's mortgage provisions:

Mortgage Reform and Handling the Mortgage Crisis

• Establishes a federal standard for home loans, and requires that institutions ensure that borrowers can repay their loans
• Prohibits financial incentives for subprime loans that encourage lenders to steer borrowers towards more expensive loans
• Requires lenders to disclose the maximum amount a consumer might may on a variable rate mortgage
• Establishes the Office of Housing Counseling (within HUD)
• Provides $1 billion to states and localities to rehabilitate, redevelop, and reuse abandoned and foreclosed properties
• Provides $1 billion to help cover mortgage payments for unemployed homeowners with reasonable prospects for reemployment
• Authorizes a HUD program to help provide forecloseure legal assistance to low- and moderate-income homeowners and tenants
   

Your National Association of REALTORS fought very hard on your behalf for this provision. Following is how NAR influenced the bill (Your RPAC dollars at Work!):

MORTGAGES

Risk Retention – Qualified Mortgage Exemption

• At NAR’s request, Congress included a qualified mortgage exemption from potentially costly--for both lenders and consumers--risk retention requirements.
• Congress gave the regulator flexibility in determining what a qualified mortgage is, however the mortgage must meet the standards laid out in the predatory lending portion of the bill. These standards include underwriting based upon full documentation, ability to repay, and limitations on fees among other things.
• NAR will work with the regulators to ensure that the regulatory framework maximizes access to affordable mortgages for consumers.

Qualified Mortgage Safe Harbor

• A safe harbor from the “ability to repay” requirement was created, which limits the total points and fees collected by lenders and their affiliates to 3. This provision was included over NAR’s strenuous and repeated objection.
• However, we believe there is some regulatory flexibility in this provision including flexibility for smaller loan amounts with “smaller” being left undefined.
• NAR will work diligently to ensure this provision is interpreted in a manner consistent with the best interests of real estate professionals, their lender partners, and their clients and customers.

Seller Financing

• NAR was successful in getting the legislation amended to allow an individual to conduct three seller financed transactions in a 12 month period without being subject to the complicated mortgage rules in the new Act. NAR has asked HUD to adopt a similar approach to exempt seller financing, up to three transactions in a 12 month period, from loan originator licensing requirements under the S.A.F.E. Act.

To learn about the other provisions in the bill where NAR advocated on behalf of the industry and the consumer click here. 

To read about the bill itself click here

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