By Jon Anderson
Columnist
No, I didn’t dig this out of my 2008 file drawer.
According to RealtyTrac, March 2015 saw an 11 percent jump in foreclosures across the U.S. compared to February. That translates into 152,147 homes rocketing down the chute to foreclosure and the loss of people’s homes in the first quarter of 2015. In the nearly 8 years since the housing bubble popped, apmid a white hot market, people are still losing their homes to foreclosure at staggering levels.
And then there’s Detroit: actively depopulating its own city by issuing as many as 62,000 eviction notices this year to homeowners delinquent on their property taxes. It’s being called an eviction “conveyor belt” that will effect one-seventh of Detroit’s remaining population. This, after the 2008 tidal wave of 250,000 people forced out of the city, leaving behind tens of thousands of their homes. The news of Detroit’s rebirth may have been exaggerated.
These are people who managed to hang on to their home through the worst recession in 80-years, only to lose it now.
So what’s the National Association of Realtors’ response? Why to spend $7.7 million on lobbying in the first quarter of 2015 for the Mortgage Choice Act (and complain about rising flood insurance premiums). As benevolent as “Mortgage Choice” sounds, its goal is to weaken the regulatory “burdens” on residential mortgage lending.
Side note: Doesn’t every piece of legislation, PAC/SuperPAC, and fringe group sound benevolent these days no matter now evil it is?
The Mortgage Choice Act passed the House of Representatives on April 14. NAR is not alone in its support, the Mortgage Bankers Association, the National Association of Home Builders and the Real Estate Services Providers Council Inc. (shockingly, all groups who make money directly or indirectly from mortgages).
The bill was originally introduced in 2014 where is passed the House before being rejected by the Senate. If at first you don’t succeed…
What does the Mortgage Choice Act do? It loosens a regulation within Dodd-Frank that capped lending points and fees at 3 percent of the loan. See, if you’re a lending bank and (whoopsie!) also own the title company, both those fees count as part of the 3 percent. But if the lending bank used a title company they didn’t own, the title fees don’t count against the 3 percent (The idea being to separate origination from title).
But the poor, poor un-prosecutable banks want alllll the fees and points in a loan (I mean, why buy the title company in the first place if you can’t skim off their fees?). The “choice” in the Mortgage Choice Act is to allow loan applicants the “choice” to use banks that own title companies AND let those banks blow the 3 percent cap on fees. Essentially a partial return to the hand-in-glove lending that brought us the bubble.
Of course the bill’s supporters herald it as the savior for low-to-middle income mortgage seekers (who seek smaller mortgages). You see, with the 3 percent cap, the BANKS couldn’t make enough profit from loan origination fees when they steered these smaller loans to their own title companies. With tear-stained balance sheets, the banks were forced to send borrowers to title companies they didn’t own (and thus no double dip on fees).
If this bill becomes law, these smaller mortgages can generate the kind of profit margins big banks love.
And that’s the point. ONLY the largest banks own title companies (just a touch monopolistic?). The consumer always had the option of going to a bank that didn’t own a title company and get the same deal. The applicant qualifications haven’t changed, just how much profit is in it for The Big Banks — the only ones profiting from this legislation.
Pearl of Wisdom: If the only people pushing legislation are those who profit from it, it’s almost guaranteed to be self-serving. Follow the money.
Becoming a Pearl: If Elizabeth Warren is against it, so should we all.
This column reflects Jon’s own opinion and isn’t the opinion of daltxrealestate.com. Agree? Disagree? Leave a comment! For hate mail from those big-old banks, shoot Jon an email. Marriage proposals accepted (as soon as they’re legal in Texas)! [email protected]
