Dear Senator Merkley,

Thank you for making an amendment to include guidelines that already exist in the mortgage industry. I have highlighted in yellow, those areas you claim fame to that already exist (see below). These provisions you so thoughtfully created are fondly known as Section 32 of The Banking Law, which prohibit steering, cap the fees of high cost loans and prohibit receiving fees from third parties. There have also been two additional amendments already on the books which cover your wise rules. RESPA which requires all fees to be disclosed to the borrower (Good Faith Estimate) within 3 days of the lender receiving the loan application and an amendment to Truth in Lending Act (TILA) which prohibit and cap high cost loans as well as requiring full income verification and ability to pay -type underwriting. (I am not getting into the technical, because that is not the issue here.) So you see, these items are already on the books and are firmly used as underwriting and disclosure guidance by the entire industry. In fact, we are all really serious about transparency and disclosure- especially these days.

What you should be preaching is consumer responsibly, because where there is a will there is a way. If you want the candy bar, you will find the candy store and you cannot shut down every candy store in America- well because there is always Walmart! If you want the money to buy the house you cannot afford, well there is always Vito on the corner.

So instead of telling the lenders that they need to lend responsibly, please focus on the consumers about learning to borrower responsibly. I have been educating first time homebuyers for years, and applaud the people that take a class to learn how to buy a home before they do it. It is not mandatory to learn how to buy and home and finance it, so the consumer mostly relies on the professional to teach them along the way. Being a professional also means being responsible-as you are in your job. So, government cannot assume that everybody in the mortgage industry is a thief, just as Americans cannot assume everybody in the senate is a liar. Why don’t you begin a campaign for mandatory education of first time homebuyers? I might applaud your good deed then. Think of it as a driving test to save the financial lives of those that buy a home as well as others on the road to economic success. After all, greed begins with those that desire, not those that provide.

Thank you,

Dale Robyn Siegel

Attorney, Mortgage Loan Officer and Educator

Copy of Press Release form the Senator’s Offices :

Merkley Introduces Amendment to Protect Homeowners from Deceptive Mortgage Practices

May 11, 2010

WASHINGTON, DC – Today, Oregon’s Senator Jeff Merkley introduced an amendment to the Wall Street reform bill that will ban one of the most egregious mortgage practices that directly led to millions of families losing their homes.  The amendment will ban mortgage lenders and loan originators from receiving hidden payments when they steer homeowners into high-cost loans and will require lenders to ensure that borrowers have the ability to repay their loans.

“Countless families entrust their mortgage lenders to do right by them when they buy a home,” said Merkley.  “Unfortunately, steering payments have put the interests of lenders at odds with the best interests of their clients.  My amendment will ban this abusive practice and restore fairness and transparency to one of the most important financial transactions a family ever makes.”

The Merkley amendment will ban mortgage lenders and loan originators from accepting payments based on the interest rate or other terms of the loans.  It would also prohibit a loan originator from receiving compensation from any party other than the borrower if they have already been compensated by the consumer.  In addition, it will require lenders to verify borrowers’ ability to repay their loans from income and assets other than the home’s value.  To help homeowners better afford the up-front costs of their mortgage, the legislation will still allow homebuyers to finance their closing costs as part of their loan.

“This predatory subprime mortgage practice directly led to the collapse of our largest financial firms and resulted in millions of lost jobs and foreclosed homes,” said Merkley.  “I urge my colleagues on both sides of the aisle to join this effort to put an end to deceptive mortgage practices that hurt our economy and threaten the livelihood of families in communities across the country.” 

Under the current rules, mortgage lenders and loan originators are allowed to steer families into high-cost and riskier loans, even when they qualify for affordable loans.  A Wall Street Journal study found that 61 percent of the subprime loans that originated in 2006 went to families who qualified for prime loans. This practice was a key driver of the housing bubble and, ultimately, the foreclosure crisis that has devastated communities across the nation. 
 
Co-sponsors for the amendment include Senators Amy Klobuchar (D-MN), Chuck Schumer (D-NY), Olympia Snowe (R-ME), Scott Brown (R-MA), Mark Begich (D-AK), Barbara Boxer (D-CA) and Chris Dodd (D-CT).

Earlier this year, Senator Merkley successfully pushed to include a provision in the Wall Street reform bill that will ban prepayment penalties.  Prepayment penalties are exorbitant fees that trap families into unaffordable loans and make it nearly impossible for families to refinance their loans.