Written By: Joan Ewing, Op-Ed Writer
Hello Everybody - I hope everyone found the information contained in Part 1 of HR 1728 as interesting as I did. As I stated I cannot image all the changes in the House Bill actually becoming law; I feel by the time it is chopped up and amended, we probably will not recognize it as it reads today.
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The HR 1728 bill also provides protection for tenants who are renting when the homes they rent go into foreclosure. Under the proposed Bill the tenants with a lease have a right to remain in the property until the end of the existing lease. However, if the purchase intends to use the property as the primary residence, the lease may be terminated with giving the tenant 90 days to vacate. Tenants without a lease or a month-to-month lease must receive 90 days to vacate.
Section 8 Housing Assistance - If a tenant is currently receiving Section 8 assistance; the purchasers of the property are subject to the existing lease and housing assistance payments for Section 8. While foreclosure does not constitute good cause for termination of Section 8 if the property is unmarketable while occupied of if the new owner will use the property as his primary residence the lease may be terminated.
Additional standards also fall under this Bill to protect consumers. They are – prohibiting certain prepayment penalties; prohibiting the credit from directly or indirectly financing a single-premium credit insurance; prohibiting mandatory arbitration and requiring specific disclosures for loans that include negative amortization features.
In the case of an adjustable rate mortgage, a notice at least six months before the expiration of a fixed introductory rate must be sent to the borrower. The notice must explain the rate adjustment process and the consumer’s alternatives and they must be given an annual notice regarding interest rate terms.
With regard to Title III (High-Cost Mortgages) there will be changes to enhance the consumer protection. Some recommended changes are: lowering the points and fee trigger from 8% to 5% for transaction of $20,000 or more and including additional costs and fees in the trigger. Prohibiting the financing of points and fees; charging excessive fees for payoff information, modifications or late payments; prohibiting practices that increase the risk of foreclosures, such as balloon payments, encouraging a borrower to default and call provisions. The Bill is also requiring pre-loan counseling.
Title IV – (Office of Housing Counseling) - The Office of Housing Counseling at HUD will be charged with carrying out and coordinating homeownership and rental housing counseling programs. The public will be informed of Housing Counseling through public service announcements, multimedia campaigns to promote housing counseling. In addition – HUD will be required to update the Mortgage Information Booklet to provide consumers with a greater understanding of the terms and purchasing a house.
Title V – (Mortgage Servicing) - This title requires borrowers with higher-cost and subprime loans to have accounts established to provide protection again tax liens and force placement of homeowners insurance.
If borrowers waive the right to have their taxes and insurance paid by the servicer, written disclosure must be given by the lender that explains the need to pay property taxes and homeowners insurance. RESPA will also be updated to create safeguards so the borrower understands when the servicer may impose force-placed hazard insurance. There will also be a mandate for swifter responses to consumer written inquiries, increasing penalties for abuses and requiring the prompt crediting of payments.
Title VI (Appraisal Activities) - Establishes strong, enforceable Federal standards with tough penalties, which allow appraisers to act as independent referees to verify the value of the property for buyer, the seller, the lender and the investor. This new Bill will also strengthen the appraiser licensing and education standards and a Federal grant program to assist States in their regulatory activities.
WOW – all these changes really get my mind racing. I am not sure how all these new regulations will be set into place. I can only image it could take years for any of these new regulations to take effect.
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If anyone has any ideas for a Blog, please let me know. Until next week – keep processing. More later.
About The Author
Joan Ewing - As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP®, please email us at: contact@mortgageprocessor.org.
