Mortgage rates have bounced in a tight range since March and there is not anything on the horizon to make them deviate one way or the other in the short-term. This steadiness of low rates helps make new home purchases more affordable and homeowners with adequate equity can refinance into a lower rate. The damage caused by loose underwriting rules, overly optimistic home buyers and some shady mortgage originators is not forgotten. New legislation continues to be debated which has the good intention of better regulating the industry. However, there are components of several pieces of legislation which, if passed into law, will hurt consumers, small businesses and appraisers.

One example is Senate Bill 896. This bill contains an amendment which outlaws the consumer’s ability to finance, including through rate or principal, any origination fees or costs permitted. This means that consumers will no longer be able to obtain a no point loan or no point/no closing cost loan and will be forced to bring money to the closing table! The major ramifications of this amendment are:

1.) Significantly increase consumers’ costs

If mortgage brokers can no longer occupy a competitive place in the market, consumers will be forced to other competitors, which will cause upward pressure on pricing because these entities will find themselves in a position to charge consumers even more.

2.) Legislatively pick winners and losers

Consumers who are unable or unwilling to come to the table with a 20% down payment and all of their closing costs and origination fees will be forced to turn to other financial institutions that may not be local or easily accessible, or will be denied access to mortgage credit altogether.

3.) Destroy small business

Mortgage brokers are small business professionals who rely on yield spread premium (YSP) as a tool to provide consumers with the no-cost mortgage loans they typically demand.

Just as the pendulum of greed and spending dominated consumer behavior a few years ago, now the pendulum swings too far in the opposite direction. Elected officials are trying to put their own personal stamp on legislation which on the surface demonstrates to voters that they are doing something about the mortgage crisis. Unfortunately, too many of these politicians lack the knowledge to understand the repercussions of their actions.

Summary of last Week’s Articles

July 24, 2009
Question of the Week: Will My Credit Score Go Down if I Pull My Own Credit Report?
NO!!!! You have a legal right to a free credit report from each of the three credit reporting agencies one time per year…. read more

July 23, 2009
Take Steps to Check Credit History with All Three Credit Bureaus
Reviewing your credit history regularly is just as important as changing the batteries in your smoke detectors every six months and getting the car oil changed every 5,000 miles…. read more

July 22, 2009
Tax Tips for Anyone Involved in a Divorce
Tax filing is hard enough, but for those involved in a divorce, it can be even more confusing. Before a divorce is settled,…. read more

July 21, 2009
Protect Yourself by Staying Aware of Internet Schemes
Internet crime schemes that steal millions of dollars each year from victims continue to plague the Internet through various methods…. read more

July 20, 2009
Congress Enacts Bigger and Better Tax Credit of up to $8000
A tax credit of up to $8000 is now available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and …. read more