There are a lot of interesting things happening to the mortgage industry due to the market flux. One of the main items of interest is the legislation currently in congress. Here is an overview of what may be coming soon.
There have been a couple FHA Reform bills in congress. One of them got a lot of publicity because it passed the House with an overwhelming majority and proposed to more than double the loan limits in high median house price areas. This bill has been held up in the Senate Banking Committee and will possibly die. There was a surety bond provision in the bill that would have allowed smaller mortgage brokers to obtain a surety bond instead of getting audited financials. This provision has unfortunately died. Many companies were hoping this would pass since it is so costly to get an audited financial statement. The only option now is audited financial with a $63,000 net worth. There are still numerous other provisions that will likely be passed by Senate. The raising of the loan limits is very likely but will not be as high as the House proposed.
Mortgage Loan Officer Licensing
There is also a bill that has been passed by the Senate Banking Committee that proposes to make it mandatory for states to adopt a loan officer licensing scheme. This is very likely going to pass. It would then give each state that doesn’t have its own licensing for loan officers about 2 years to put legislation and regulations together to make this happen. If the state doesn’t meet the requirements of the bill, then HUD will be required to step in and set up loan officer licensing for that state. The larger short-term impact of the passage of a House bill is that the states will pick up on it as a template for new state law enactments in the coming state legislative season, which starts around the first of the year. Buckle your belts for the states to really get crazy soon.
Yield Spread Premium
The final interesting item being discussed in every mortgage company right now is the provision for “eliminating YSP.” I put it in quotes, because the legislation doesn’t really eliminate YSP, it just requires that the YSP be disclosed up front as an actual figure instead of just 0% to 3% like it is now on most Good Faith Estimates (GFE). This will change this a little bit, but it won’t really affect the mortgage broker industry as much as some opponents to the bill say.
Be Ready for some exciting changes to happen in the mortgage industry soon. The government is looking to make a change to the current system and although many might argue that it won’t help, it will definitely happen and change the industry forever.