Attempts at Relief and Reform

Thoughts on Reforming the Mortgage Industry

Posted on Tuesday, February 17, 2009

FIX THE MORTGAGE BUSINESS


Borrower/Broker Education
Develop a true borrower/even broader financial education program that actually teaches and benefits originators to send customers to. Require objective financial teacher to approve loan too/provide incentive to borrower if this person approves the loan for them. Lenders pay – saves them default and servicing costs. Require originator to maintain certification.

Pros: Broader benefits, sends right message.
Cons: May discourage originators working with first time and lower end borrowers. Riskier for them and less money to make. Argument is this type of borrower takes more time, originator should earn more. Eventually some will find a way around it.

Originator Certification/Monitoring
Require brokers serving population that tends to be taken advantage of to get special license and pay additional licensing fee to fund abuse fund. Require originators to document/prove borrower could not get conventional loan. Justify subprime type decisions. Keep record of originators who put borrowers into loans that are foreclosed.

Pros: Sends right message, may keep the bad guys out of the business.
Cons: May discourage originators working with first time and lower end borrowers.

Tax Origination Fees
An outright cap would be unfair. Establish formula and tax fees above formula to fund abuse fund.

Pros: Pros: Sends right message, may keep the bad guys out of the business.
Cons: May discourage originators working with first time and lower end borrowers.

Riskier for them and less money to make. Argument is this type of borrower takes more time, originator should earn more. Eventually some will find a way around it.

Tax Origination Fees and Proceeds from Non-Essential Primary Residence Cash-Out Refinances
Encourage homeowners to preserve equity as a nest egg. Discourage originators from encouraging homeowners to borrower more than they need. Limit or tax frequent refinances (HOEPA already does this to some extent).

Con: Some owners may not be able to avoid the refinance, ends up costing them more when they can least afford it. File for “exemption certificate?”


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