December, 2007
Feature
Inspection News and Views from the American Society of Home Inspectors



House of Representatives Introduces Key Subprime Mortgage Reform Bill

RANDALL PENCE

On October 22, Cong. Barney Frank (D-MA), chairman of the House Committee on Financial Services, and other committee members, introduced HR3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007.  

This legislation is the long-anticipated legislative response to the subprime mortgage problem that is causing so much uproar and uncertainty in the residential housing market.

There bill would reshape some of the key relationships in the realty-related professions. For example, it would establish a federal duty of care among mortgage originators (though the bill does not identify what that duty of care would be in its entirety). It would provide widely differential treatment for loans that are considered high-risk loans, versus non-high-risk “safe harbor” loans. 

The bill also includes provisions on housing counseling, an issue of interest to ASHI inasmuch as ASHI is working on housing counseling legislation, focusing on the training of HUD housing counselors on home inspection.  
Quoting from the House Committee on Financial Services, HR3915 “will reform mortgage practices in three areas.  First, the bill will establish a federal duty of care, prohibit steering, and call for licensing and registration of mortgage originators, including brokers and bank loan officers.  Second, the new legislation will set a minimum standard for all mortgages which states that borrowers must have a reasonable ability to repay.  Third, the legislation attaches limited liability to secondary market securitizers who package and sell interest in home mortgage loans outside of these standards.  However, individual investors in these securities would not be liable.  Finally, the bill expands and enhances consumer protections for “high-cost loans” under the Home Ownership and Equity Protection Act and includes important protections for renters of foreclosed homes.”

The ASHI leadership is currently reviewing HR3915 for its impact on ASHI members.  The future of the bill is uncertain at this time.  ASHI will continue to track the progress of the bill and may offer testimony and other comments in the interests of ASHI members.

RESPA Reform Revival?

There are indications that HUD may be finally ready to submit a RESPA reform proposal to the White House Office of Management and Budget (OMB) for final review.  At this writing, the proposal may have already been submitted.  Of course, any submittal is still very much a draft and no details are available.  OMB has limited amount of time to review the draft and make a determination on how or whether to proceed.  If rumors regarding the review process are true, HUD and OMB may be on track for publishing its draft RESPA reform proposal as early as January or February of 2008.  However, there is no firm timetable, and moving a major RESPA reform proposal in the heat of an election campaign with control of both Houses of Congress and the White House at stake would be a monumental task.  Nonetheless, any meaningful RESPA reform proposal may have significant impact on ASHI home inspectors.  ASHI will monitor closely to represent the interests of the ASHI membership.