My Perspective

Although I have been personally very engaged with the Internet since way back in 1995, it was later in 1999 when I designed a mortgage brokerage website to accomodate my desire to once again become a mortgage broker (after almost 30 years as a lender and the last three years as a mortgage independent consultant – being in and out of the hospital for the 3 cancer surgeries I had during that period while I was a consultant with irregular hours); I realized I needed to get back in the game, I was borded.

After operating that brand new mortgage brokerage operation with only me, my newly created website (helper), and a couple of high-school aged girls off and on, I understood what I had done was to start a business that replaced what 5 full time employees would have otherwise been able to accomplish!  Given that worked well (for the 250,000 website visitors we attracted and the 2,200+ originations I did during it’s 39 months of operation), I got myself licensed as a certified teacher here in California; began to teach a class on Website & Internet Originations. To this day, it’s the only class of it’s kind I have heard of out there in the wilderness. Even though I have seen several firms that today sell (faulty and frequently unlawful) mortgage website templates, nobody else has taken up a competing class against us and showing mortgage originators HOW to use it best! 

I give you this little bit of background to sort of help you see why I may seem to focus on SEO, the Internet and things like that as freuqently as I do. This is the way of tomorrow, today!

Day before yesterday I mentioned that we are developing our all new Master Seminar Series to be web-based … begining in three (3) weeks. So far I have seen demos from two different firms that offer this technology, and I may have settled on the one we’ll utilize. Once I am fimilar with  it’s ‘pros’ and con’s’ I ‘ll give you my recommendation on who I suggest you pick for your own operation. I can already see dozens of situations where this can benefit Secret! University and also a numbers of ways it can enhance your own mortgage operation too!

At this same time, I am also exploring utilizing Video e-mail, and here too I easily can see how that can intergrate with the web-based technology for seminars, conferences, and meetings on the Intertnet. On this issue, I’m 90% of the way with who I intend to select; and already ordered my web-camera/mic!

Unless you are looking into all the newly available technology for your mortgage operational needs, you’re going to be left in the dust my your competition!

Some of you might know my oldest is a big-shot at Dreamworks/Paramount, on the computer side naturally. At 41 years old, my little boy’s turned into one heck of a Great young man, and smart as a whip about all things computer! More than a year ago we started some off and on dialogue, about Secret! University offering web-based seminars, conferences, meetings, etc… I’ve been resisting that step, since I think face to face training builds confidence and better understand, but as he tells me “… Dad these things are convenient; people these days are busy Pop!”

Today I completed two separate demos/training sessions, and I’ve decided to hold our very next Master Seminar on the web! Aside from the ‘convenience’ factor, I now see this method should bring a lot more people into the fold at Secret! University, since so many of our past students have had to fly in for all of our various sessions. I’m going to start with this one; I’ve scheduled it to run 90 minutes, late next month, and I’m pretty excited about it! Going to broadcast a Press Release about it tomorrow!

Over the week-end I completed The Mortgageland Journal’s September 1st issue, and this is the lead article. I thought it would be a good idea to share this with you today … hope you like it:

It has been estimated that I’ve made credit decisions on somewhere between 20,000 and 30,000 individual transactions throughout my career in the lending industry; therefore I feel qualified to speak to this subject. Internally I have followed this simple guide upon reviewing a complete credit report: “An applicant is acceptable if they have a satisfactory credit history with no recent significant credit problems” because, if the customer can’t pass that standard, it’s unlikely I would ultimately find them qualified to receive an approval.

When you are reviewing a loan package for approval consideration, if for example, you are a mortgage broker or a mortgage banker (who ‘originates to distribute’ servicing released) your thinking is quite different – but it shouldn’t be – from someone who is a portfolio lender and/or a mortgage banker seller/servicer – as in both of the later cases you’re with those lending decisions to the conclusion of their repayment term; it’s not ‘you’re approved then buh-bye’ instead, your own future career is on the line, as are the subsequent efforts it may take to collect all of the monthly payments, along with avoiding losses, in the final analysis. So if you’re among those first two groups, time to change is long overdue, because that ‘cyborg approach’ is precisely what has caused the collapse of the secondary market.

These days credit decisions are arrived at utilizing credit scores, and matrixes of scores vs. LTV vs. DTI ratios and also by utilizing ‘adds’ to the buy-rates for perceived increased risk. Unlike the more common sense methods above, where getting back the payments was a paramount consideration, today Wall Street’s commission-driven computerization approach, and often arbitrary ‘adds’ plus pushing the paper/and risks down the street (or overseas) to the next guy, has clouded this subject to a considerable degree in my judgment. They may argue it’s usage is justified do to a range of increased production needs, but it has spawned reckless lending programs, and almost no common sense to approval decisions.

This issues of unrestrained ‘adds’ to the buy rate has puzzled me for almost two decade, since the Wall Street investment bankers and others have been slicing and dicing what they call ‘risks.’ I’ve often wondered as you may have as well, do they mean risk of potential loss or risk of reduced/delayed income because of increased servicing activities and expenses? For example, we intuitively know there is both an ‘increased risk of loss’ and additionally an ‘increased risk of extra expense to service’ a non-owner occupied property vs. an owner occupied one; but should that difference increase the ‘coupon’ by as much as 200 basis points? Or, a 50 basis point spread on duplex vs. tri-plex or four-plex, or how about 25 basis points for an impound waiver? Having also been a FreddieMac seller/servicer myself, and knowing the internal numbers as the owner of the company … I can tell you, NO is the real answer to those questions.  Now, I’m sure somebody could try and baffle me with stats, but nope, those pumped-up annual interest rate amounts I frequently see on ‘rate sheets’ are much too high for these variances. ‘Too high’ translates into extra profits, or seen from the other side, rates higher than they need to be for consumers, thereby increasing the risk of DTI’s chocking the customers in short order, and creating an unnecessary extra risk of default. You see, it can easily be argued from either viewpoint.

The Three C’s of Credit are simply: Character, Capacity, and Collateral all considered together with a heavy dose of common sense.

Acceptable Character is basically a detailed line-item analysis of the credit report of an applicant, along with their stability of residence, occupation and employment. On balance, there is a scale here, from top-notch ‘gold plated’ all the way down to ‘lousy.’ The further away from lousy, the stronger this segment is. FICO completely misses much of this Character area. And this one is considered most important by many long-experienced consumer credit grantors (like me BTW).

An applicant’s (proven verified long-term historically stable) Capacity to good lending decisions is critical, as it is essential that any new customer have the ability to repay their debts. The Character segment’s relative strength tells us their willingness to take care of their obligations in an acceptable manner. Capacity measures their ability (whereas Character deals with their desire to make payments on time).  Can they afford it is the question to be asked here. For this area to be acceptable, a likely reliable and steady available future income stream is essential so the customer has the funds to make timely payment.

The Collateral, which secures the transaction, is the third of the Three C’s. Obviously, the more security, which collateralizes the loan the better, and the stronger, this piece, will be. This segment is thought of by many however, as the least important area of approvals, as it can lose value and, upon default is not always of satisfactory quality/marketability, or accessibility.

With two of these segments strong, and only one weaker, even though not ideal, it can still be an adequate formula for a more ‘conservative’ loan approval. If two segments are weak, that is generally a recipe for disaster. Having all three fragile at origination, barring a miracle, it’s most certainly a future loss.

These are the principles, which yield tolerable loss ratios and maintain a sound-lending environment, both for today and tomorrow. When these time-honored standards are not followed, chaos is the outcome. And sometimes it comes at warp speed!

Considering the amount of brain damage I got from reading Public Law No. 100-289, yesterday I needed to take a little bit of time off … so I went to probably my final LA Dodges baseball game … Final?

Yep, and here’s why: Not only have I seen that our new Manager, (the former World Famous manager of the New York Yankees) has somehow caught the dreaded ‘sometimers’ disease, and repeatedly forgets which players play best at which position – that alone has been driving me NUTS - but yesterday was the topper. $15 in gas to get back and forth to the game, $17.50 to park, a ordinary/common regular so-so ‘Reserved level’ seat $16, then came the real fun … $5 for a soda, $10 for two Dodger hotdogs, later $5 for a bag of peanuts, and at the 7th inning stretch (it was hot out there) the stands filled with ice cream vendors … so a mere $6 more for an ice cream!

For a team, that has struggled all year to finally play just barely above 500 ball (for those of you who are not baseball fans – that SUCKS); plus the outrageous expense to visit the park, the crowds, etc. … I’m gonna stay home and watch them on my DirecTV! from now on … it’s just not worth the punishment.

TITLE VI addresses VETERANS HOUSING MATTERS, there’s a large section significantly amending the U.S. Code on HOME IMPROVEMENTS AND STRUCTURAL ALTERATIONS FOR TOTALLY DISABLED MEMBERS OF THE ARMED FORCES BEFORE DISCHARGE OR RELEASE FROM THE ARMED FORCES and also on ELIGIBILITY FOR SPECIALLY ADAPTED HOUSING BENEFITS AND ASSISTANCE FOR MEMBERS OF THE ARMED FORCES WITH SERVICE-CONNECTED DISABILITIES AND INDIVIDUALS RESIDING OUTSIDE THE UNITED STATES consisting of eligibility standards and a massive amount of detail, along with a lot of modified code for SPECIALLY ADAPTED HOUSING ASSISTANCE FOR INDIVIDUALS WITH SEVERE BURN INJURIES; EXTENSION OF ASSISTANCE FOR INDIVIDUALS RESIDING TEMPORARILY IN HOUSING OWNED BY A FAMILY MEMBER and INCREASE IN SPECIALLY ADAPTED HOUSING BENEFITS FOR DISABLED VETERANS … over 5 pages and 2,000 words cover the enhancements for our Veterans. If you specialize in VA loans, I strongly urge you to visit the Law’s text; do a search on VETERANS HOUSING MATTERS and cut and paste that entire section, as their is some serious and important changes in the niche for our Veterans, that you may want to study closely.

Up next is SMALL PUBLIC HOUSING AUTHORITIES PAPERWORK REDUCTION ACT, HOUSING PRESERVATION, then MISCELLANEOUS, TAX-RELATED PROVISIONS, HOUSING TAX INCENTIVES, REFORMS RELATED TO REAL ESTATE INVESTMENT TRUSTS, REVENUE PROVISIONS, PUBLIC HOUSING DISASTER RELIEF, PRESERVATION OF CERTAIN AFFORDABLE HOUSING, HOMELESS ASSISTANCE, INCREASING ACCESS AND UNDERSTANDING OF ENERGY EFFICIENT MORTGAGES. The ‘Housing Assistance Tax Act of 2008′ also covers HOUSING TAX INCENTIVES, certain provisions about REFORMS RELATED TO REAL ESTATE INVESTMENT TRUSTS … HOUSING TAX INCENTIVES for LOW-INCOME HOUSING TAX CREDIT provides for a temporary increases until December 31, 2009; quite a bit on eligibility standards, and other incentives as they relate to MILITARY BASE PAY. Plus, MODIFICATIONS TO TAX-EXEMPT HOUSING BOND RULES along with the COORDINATION OF CERTAIN RULES APPLICABLE TO LOW-INCOME HOUSING CREDIT AND QUALIFIED RESIDENTIAL RENTAL PROJECT EXEMPT FACILITY BONDS … all areas to promote increased homeownership for Americans and a lot of public policy amendments.

The FIRST-TIME HOMEBUYER CREDIT allowance is a nice new one ” … the amendments made by this section shall apply to residences purchased on or after April 9, 2008, in taxable years ending on or after such date … in the case of an individual who is a first-time homebuyer of a principal residence in the United States during a taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to 10 percent of the purchase price of the residence. There is restriction “… the credit allowed shall not exceed $7,500 …” then four more pages of nearly 2,000 words of fine print; check it out directly to capture all the details for your marketing efforts toward FTBs.

Buried way down here near the end, I noted his nice little gem … ADDITIONAL STANDARD DEDUCTION FOR REAL PROPERTY TAXES FOR NONITEMIZERS. It says in general in the case of any taxable year beginning in 2008, the real property tax deduction is amended by adding … the real property tax deduction is the lesser of the amount allowable as a deduction under this chapter for State and local taxes, or $500 ($1,000 in the case of a joint return) … the effective date of amendments made by this section shall apply to taxable years beginning after December 31, 2007.

We end with REFORMS RELATED TO REAL ESTATE INVESTMENT TRUSTS, REVISIONS TO REIT INCOME TESTS, REVISIONS TO REIT ASSET TESTS, CONFORMING FOREIGN CURRENCY REVISIONS, REVENUE PROVISIONS, CERTAIN GO ZONE INCENTIVES, and my favorite the INCREASE IN STATUTORY LIMIT ON THE PUBLIC DEBT “… is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $10,615,000,000,000.”

Reading and commenting on this monster has consumed most of my last three (3) weeks; I’m almost sure I’ve gotten severly brain-damaged  :-} …

Public Law No. 110-289 is exactly 694 pages long!! If you care to read the text yourself, it’s right HERE . Also, if you want to visit the website of the Office of Federal Housing Enterprise Oversight (OFHEO), it’s HERE and there’s also a place there where you can request to be placed on their Press Release e-mailing too!

As with many of the Olympics events, the semi-finals of most matches means the medals are next, then finished. After today’s Blog post, I now can clearly see the finish; I expect just one more Blog post will finally complete this Public Law No. 100-289 narrative, Thanks for hanging in there with me.

I can recall the many years ago, when our young company received it’s FHA Title I approval package in the mail.  It contained their insurance contract with my company, other paperwork, and if I remember correctly four decals to post on the windows that faced outside (we had a retail ground floor office) … the EAGLE (there were 2) was about the size of a beach vollyball and there were also 2 other smaller ones, just about the size of  that disc our female Gold Metal winner tossed in her first throw day before yesterday!  I was excited and wanted them up on the windows and proudly displayed for our customers to see! I was also still very uneasy about one troubling area in the contract with HUD however. As a lender, and ‘holder in due course’ whenever we financed stuff, if the manufacturer/distributor (‘Dealer’) when out of business and/or wouldn’t honor its warranty/guarantee work etc. for borrowers, the Lender was obligated to actually perform those duties (even if we didn’t know how, we had to pay and hire people to do it); couldn’t afford that? Then the borrower’s contract with us would be VOID! Therefore we were always concerned about the Integrity and Financial status of our “dealers’ – from your own ‘gut’ that made clear good sense to both protect the borrowers and ourselves. Well our pals at HUD, went one better! They mandated that WE guarantee the ‘financial statements’ of the dealers were 100% honest, genuine and all they proprted to be … not merely to the ‘best of our knowledge’, but we had to warrant they were actually true! WOW!! Because of that, I set our production goals very low, since I was worried to death one of them might bury us if they defaulted in their future obligations to the borrowers! I understood HUD’s position though, if they were compelled to pay-out a loss claim, they wanted to not only be able to potentially go back on the borrowers, and the dealers but for good measure, they wanted us all tied together in a nice little bow to help mitigate their losses! I wonder if they ever changed?

The next area, Section 2141, covers the ‘FHA Manufactured Housing Loan Modernization Act of 2008’ and it’s purpose as spelled out “… the purposes of this are to provide adequate funding for FHA-insured manufactured housing loans for low- and moderate-income homebuyers during all economic cycles in the manufactured housing industry; to modernize the FHA title I insurance program for manufactured housing loans to enhance participation by Ginnie Mae and the private lending markets; and to adjust the low loan limits for title I manufactured home loan insurance to reflect the increase in costs since such limits were last increased in 1992 and to index the limits to inflation.” This section goes on to discuss the revision of Maximum Loan Amounts, Insurance Premiums, some Technical Corrections, and that Hud shall shall revise the existing underwriting criteria for the program within 6 months.

The next section – Title II is the MORTGAGE FORECLOSURE PROTECTIONS FOR SERVICEMEMBERS portion of Public Law 110-289. Part of which is generally a temporary 25% increase in the maximum loan amount on VA Loans until December 31, 2008. Plus its “implements a program to advise members of the Armed Forces (including members of the National Guard and Reserve) who are returning from service on active duty abroad (including service in Operation Iraqi Freedom and Operation Enduring Freedom) on actions to be taken by such members to prevent or forestall mortgage foreclosures.” Additionally certain portions of the ‘Servicemembers Civil Relief Act’  (as I recall it’s the successor to the former Soldiers & Sailors Relief Act of 1944) are enhanced and extended ….”

For the remained of fiscal year 2008, under the EMERGENCY ASSISTANCE FOR THE REDEVELOPMENT OF ABANDONED AND FORECLOSED HOMES section “… $4,000,000,000 is to remain available until expended, for assistance to States and units of general local government for the redevelopment of abandoned and foreclosed upon homes and residential properties.” It then rambles on for four pages and almost 2,000 words detailing under which conditions this money is to be utilized.

One of the smaller sections of this new law is next,the MORTGAGE DISCLOSURE IMPROVEMENT ACT OF 2008. It enhances and modifies portions of certain language in the Truth in Lending Act Disclosures.

The COMMUNITY DEVELOPMENT INVESTMENT AUTHORITY FOR DEPOSITORY INSTITUTIONS modifies 12 words in several statutes enhancing the authority of both National Banks and State Member Banks for these purposes.

Coming up next time is TITLE VI–VETERANS HOUSING MATTERS ….

The next section, which some of you may have seen some press on is the ‘Foreclosure Prevention Act of 2008′, this segment covers he much heralded ‘FHA MODERNIZATION ACT OF 2008′ including the ‘Building American Homeownership’ subsection. Here’s where they’re updating calculations and definations of maximum LTV’s and modifications to MI premiums, along with the bombshell PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE … and “… mortgagor who shall have paid, in cash or its equivalent, on account of the property an amount equal to not less than 3.5 percent of the appraised value of the property or such larger amount as the Secretary may determine … plus … on and after October 1, 2008 … in no case shall the funds required consist, in whole or in part, of funds provided by any of the following parties before, during, or after closing of the property sale: (i) The seller or any other person or entity that financially benefits from the transaction.(ii) Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in clause.” And, as we all know, that appropriately kills the DPA sector of our industry.

This act from there, goes on to cover several other mind-numbing areas, but the ‘PILOT PROGRAM FOR AUTOMATED PROCESS FOR BORROWERS WITHOUT SUFFICIENT CREDIT HISTORY’ one caught my eye. It says “… The Secretary shall carry out a pilot program to establish, and make available to mortgagees, an automated process for providing alternative credit rating information for mortgagors and prospective mortgagors under mortgages on 1- to 4-family residences to be insured under this title who have insufficient credit histories for determining their creditworthiness. Such alternative credit rating information may include rent, utilities, and insurance payment histories, and such other information as the Secretary considers appropriate. The Secretary may carry out the pilot program under this section on a limited basis or scope, and may consider limiting the program to first-time homebuyers. And, in any fiscal year, the aggregate number of mortgages insured pursuant to the automated process established under this section may not exceed 5 percent of the aggregate number of mortgages for 1- to 4-family residences insured by the Secretary under this title during the preceding fiscal year.” At least to me, this one hit’s the nail squarely on the head, it defines what FHA is really all about, and I like it!

I’m starting to feel just like this guy, reading all this …

The sections on Assisting Communities Devastated by Foreclosures, Providing Pre-Foreclosure Counseling for Families in Need, Enhancing Mortgage Disclosure; and Preserving the American Dream for Our Nation’s Veterans are all clean and straightforward (getting into each of them would take me sereral more weeks of blog posts)… but there’s still plenty more to go … we’ve only covered 265 pages and 81,483 words .. up next is “Subtitle B–Manufactured Housing Loan Modernization.”

I am troubled over my mistake in yesterday’s blog about Director Lockhart at the FHEO. I know, not only do readers come to this Blog for my long-experienced unique perspective and analysis on issues facing our industry; many rely that they are correct, so I am very concerned about that mistake, again I’m very sorry for the goof.

The landmark Truth in Lending Act got modified by the FIDUCIARY DUTY OF SERVICERS OF POOLED RESIDENTIAL MORTGAGE LOANS section now including new significant ‘fiducary duty’ language, as well as new REVISED STANDARDS FOR FHA APPRAISERS … both additions are rather straightforward with no bombshells or controversy that I can see.

Unlike my blog post day before yesterday about the temporary HOPE FOR HOMEOWNERS PROGRAM that’s getting the most press because of all the current mortgage crisis and the foreclosures nationwide, this segment of 110-289 the ‘Secure and Fair Enforcement for Mortgage Licensing Act of 2008’ or ‘S.A.F.E. Mortgage Licensing Act of 2008’ will have a powerful positive effect on this business, again no bombshells but loaded with controversy and disagreement by the mortgage brokerage community who traditionally insist they should never have to have a ‘fiducary duty’ to their clients, and aggressively stall all efforts to that end - additionally they even disagree they should properly disclose the YSP’s they earn, even though it is thoroughly documented they frequently ‘stuff down the throats of insuspecting applicants’ significant extra fees, costs and other charges.  This SAFE Act says ” … in order to increase uniformity, reduce regulatory burden, enhance consumer protection, and reduce fraud … the States are hereby encouraged to establish a Nationwide Mortgage Licensing System and Registry for the residential mortgage industry ….” and then it goes on for almost 6,000 words and 17 pages all about definitions, standards, a unique identifier, privacy of the information,various requirements, etc. with major areas of concern left untouched! 

One news account I saw says: ‘… the new registry established to license and police mortgage brokers is flawed. They also contend that by ducking the toughest reform – yield-spread premiums – policymakers have made it impossible for consumers to compare loan costs. “The borrower has a great difficulty determining how much the broker is being paid and there’s this great confusion over whom the broker is working for,” he said. “They may unscrupulously steer customers to more expensive products for a bigger payout. “When you incent a broker to give a borrower a more expensive loan than they qualify for, that type of practice is central to our current crisis” - a viewpoint which I totally agree with.

That’s a pretty widely held opinion and part of the reason these licensing requirements for brokers and setting up a national registry. It’s also why the Federal Reserve Board, in its update of its Truth in Lending rules, flirted with requiring  additional disclosures from brokers. Both of those federal efforts followed an attempt by state regulators to better track mortgage brokers and their Loan Officers, who have been responsible in large part for today’s mortgage crisis (not exclusively that’s for sure …. see CHAIN OF BLAME for that full story).

Even though we know this Nationwide Mortgage Licensing & Registry System has been worked on for more than a year by many different State regulators, and with more than a dozen States already on board, this SAFE Act says it all should all be in place promptly by October 2010!!  … our Government at work.

I guess trying to translate this into meaningful English is frying my brain, yesterday I made a serious mistake. I remarked that the new chief at FHEO had not yet been appointed by the President, when actually it happened many weeks ago! I apologize for that oversight … BUT I think I know why it slipped my mind, and that is I had expected something this important would get us someone highly qualified to head up such a vital Government program, given the extent of it’s oversight and power;  I have previously commented the qualifications looked pretty good to get somebody with some serious horsepower!  You all DO remember the “… Brownie’s doing a good job as the head of FEMA … ” comment by President Bush and the solid long-experienced qualifications we later discovered ‘Brownie’ really had? Well guess what? We got yet another political hack, a crony, and if you read his credentials as I just did, you’ll probably agree with me … so go ahead and meet James B. Lockhart III the former Deputy Commissioner of Social Security. 

Anyhow I expect to finish my review of the next several hundred pages of the new Law I haven’t covered so far, by this coming Monday, so stay tuned!

As with many Government Programs, Public Law 110-289 creates a new independent Agency will be created to oversee the GSEs and will be called the Federal Housing Finance Agency (FHFA), along with a ‘Board’ that is to ‘advise the (new yet to be appointed) Director with respect to overall strategies and policies in carrying out the duties of the Director under this title. It will be comprised of 4 members: the Secretary of the Treasury, the Secretary of Housing and Urban Development, Chairman of the Securities and Exchange Commission; and finally the Director, who shall serve as the Chairperson of the Board’ therefore until the Director is in place, it cannot make many decisions that yet need to be set in concrete.  I’ll be very interested to see who it appointed to this important post (the qualifications of the new Director are spelled out pretty well I might add here).

Today let’s see about the HOPE FOR HOMEOWNERS PROGRAM … this section is really fascinating to me, it begins when this law becomes effective October 1, 2008  and automatially sunsets September 30, 2011; it is $300 Billion in size. It’s purpose, among other things, ‘is to create an FHA program, participation in which is voluntary on the part of homeowners and existing loan holders to insure refinanced loans for distressed borrowers to support long-term, sustainable homeownership; to allow homeowners to avoid foreclosure by reducing the principle balance outstanding, and interest rate charged, on their mortgages; to help stabilize and provide confidence in mortgage markets by bringing transparency to the value of assets based on mortgage assets; to target mortgage assistance under this section to homeowners for their principal residence ….’ It’s got plenty of priovisions in it to prevent the bad guys (fraudsters) from getting access to this program.

These owner-occipied borrowers must have had a ratio of mortgage debt to income, taking into consideration all existing mortgages of that mortgagor at such time, greater than 31 percent (or such higher amount as the Board determines appropriate) back on (?) March 31, 2008. The principal obligation amount of the refinanced eligible mortgage to be insured shall be determined by the reasonable ability of the mortgagor to make his or her mortgage payments, as such ability is determined by the Secretary pursuant to section 203(b)(4), or by any other underwriting standards established by the Board; and shall not exceed 90 percent of the appraised value of the property to which such mortgage relates. All subordinate liens and amounts on senior liens now in place in excess of 90% are extinghuished  Subordinate lienholders will be entitled to share in any equity appreciation with HUD (based upon a detailed scale upon future sale or refinance – share amount for them not established yet); also a formula to share equity appreciation with the homeowner as well (max 50%). For this HOPE program, the new loan amount cannot exceed $550,400.00. The MI Premiums will be 3% up front premium and with an annual premium thereafter of 1.5% of the loan amount (WOW!), all will be fixed rate, and the new loan terms will all be not less than 30 years. Specifically “Under the direction of the Board, the Secretary shall take such actions as may be necessary to – (1) contract for the establishment of underwriting criteria, automated underwriting systems, pricing standards, and other factors relating to eligibility for mortgages insured under this section; (2) contract for independent quality reviews of underwriting, including appraisal reviews and fraud detection, of mortgages insured under this section or pools of such mortgages; and (3) increase personnel of the Department as necessary to process or monitor the processing of mortgages insured under this section.”

One summary I have seen (from Theresa C. Ballard the CAMB Government Affairs Vice-Chair) says “…the respective Agencies (FHFA, Fannie, Freddie and HUD) will have to put into place policy and procedures on how to implement the rules established in HR 3221.  Once the Agencies have established their procedures, the Investors/Lenders will begin their process of disseminating information ….” Yet as I read this (unlike Theresa’s thoughts), the BOARD is required to do that, so until we have the new Director in place, the Board can’t issue any such ‘policies, procedures, or implementations.’ In fact the Law says specifically: “the Board shall establish requirements and standards for the program; and prescribe such regulations and provide such guidance as may be necessary or appropriate to implement such requirements and standards.” And also it says “… Under the direction of the Board, the Secretary shall take such actions as may be necessary to contract for the establishment of underwriting criteria, automated underwriting systems, pricing standards, and other factors relating to eligibility for mortgages insured under this section; to contract for independent quality reviews of underwriting, including appraisal reviews and fraud detection, of mortgages insured under this section or pools of such mortgages ….”

About half way through this 700 page statute … and, if you think I enjoy all this reading, you’re nuts!