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Preserving a level playing field and access to mortgages

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Today, the CFPB is issuing an interim rule effective immediately to fill a regulatory gap.

Some lenders are chartered or licensed by states, while others operate under federal charters. For years, state lenders have been able to rely on a federal law called the Alternative Mortgage Transaction Parity Act (or AMTPA, for short) to make variable rate loans and other “alternative” mortgages, regardless of state law restrictions. Congress passed AMTPA to allow state lenders to make alternative mortgages on the same footing as their federally chartered competitors. Last year, the Dodd-Frank Act amended AMTPA to update it and to provide states more room to regulate certain fixed-rate loans and certain features of adjustable rate mortgages.

Without this interim rule implementing the AMTPA amendments, state lenders would lose their ability – overnight – to rely on AMTPA to make alternative mortgages. That could hurt not just state lenders that rely on AMTPA, some of which may be small rural banks. It could also hurt consumers by reducing their access to mortgages from those lenders. And, all of this harm would occur quite suddenly.

This interim rule will help preserve certainty in affected mortgage markets. It will also give lenders, consumers, and state regulators time to adjust to recent changes to the law. AMTPA was designed to preserve consumer access to alternative mortgages. These mortgages aren’t for everyone, but some consumers find that alternatives to the traditional fixed-rate mortgage better suit their needs. Our action today helps preserve parity and access as Congress intended.

Today’s rule also reflects the Dodd-Frank Act’s amendments to AMTPA, and the CFPB will continue to work to implement Congress’ goals. But the full process will take time. We are asking for public feedback on the temporary rule we are issuing today. This input will help us develop a proposal for a permanent regulation, which we will issue for public comment and then revise before finalizing. In the meantime, the interim rule will prevent disruptions of mortgage lending and allow orderly implementation of the Dodd-Frank amendments.

The interim rule gives state lenders two choices: They can follow state law when they make alternative mortgages or they can follow some straightforward federal requirements that provide consumers basic protections. For example, under the federal requirements, lenders must use a fair and transparent method – like a publicly available index that the lender does not control – for changing the rate on an adjustable rate loan.

The Dodd-Frank Act requires that the permanent rule address alternative mortgages made by federally chartered lenders as well as state lenders. So we are seeking information about alternative mortgages generally, as well as those made specifically under AMTPA. Please provide us with your input on the interim rule by September 22, 2011, to help us begin the process of proposing a new permanent rule for public comment.

  • Guest

    I cannot save this article as a PDF; it becomes encrypted.  I also cannot email it to myself so I can save the email.  The site claims it sent, however, it has been an hour and I still haven’t received the email.  Can something be done to this site so I can save articles without printing them and wasting paper?

    thank you.

    • Guest

      If you opend the PDF by clicking on the icon above, then use the SAVE button after the document opens, you should be able to save it to your desktop.

      • Guest

        That only works for the final rule, not the article. 

  • Jazz Tbone

    I sure have enjoyed the lower payment that my “interest only” REM has provided over the last 5-6 years! Since I was planning on staying in the home for number of years, this lower REM pmt allowed me flexibility from being required to pull $ from savings to pay the REM payment.

  • Susan1968

    “ That could hurt not just state lenders that rely on AMTPA, some of which may be small rural banks.”

    fNote: This is not a complete sentence!

  • http://pulse.yahoo.com/_YD4X2F5YBTKPCKDFIHRSJROU7E Leonard C. Tekaat

    The middle class has been been financially beat-up badly during the currant financial crisis. They were served up mortgages that were designed to cause a failure if the market turned down or changed with higher interest rates. The consumer has lost a large portion of their disposable income and confidence.

    To improve this situation, improve the housing market, employment and the economy in general, a mortgage with new terms needs to be offered to the general public.

    I have outlined what is need in the following article.

    Private Sector Solution for Economic Recovery
    Many economists will tell you that the depressed condition of the primary housing market is one of the main reasons the economy has not fully recovered. The unemployment and foreclosure crisis has been put on a back burner because so far no one has presented a good solution for it. I believe if we empower the people with the tool they need, they will bring about their own economic recovery without the government increasing its debt.
    We created the current financial crisis when the middle class and other people were offered and they accepted mortgage terms that were destined to create economic defaults. The collapse of the primary housing market destroyed an enormous amount of the middle class’s disposable income and confidence. This is what had to be repaired before roads and bridges were repaired to increase economic activity.
    We are in a very critical period of the current economic turmoil. The government’s deficit spending programs have not been very successful in improving the economic condition of Main St. This is where the private sector has the power to succeed, where the government has failed by working alone. I believe we need new mortgage terms made available to almost all primary homeowners, not just for people that are having financial trouble. Mortgage terms that will help all of the middle class and other people succeed financially. The middle class is so large, if they succeed financially, the nation’s financial condition will improve.
    The new mortgage terms should be similar to the current 5/1 Adjustable Rate Mortgage, but with the following changes. The starting interest rate should be 3%. The interest rate would increase .25% per year. The interest rate would stop increasing at 5%. The down payment would be 10%. A lower down payment would require mortgage insurance. New purchases and refinances would qualify at 5%, with a 3% starting interest rate, so we reduce the chance of new defaults. To solve the underwater mortgage problem, underwater mortgages should be reduced an additional 30% of the monthly principal and interest payment each month until the value of the home equals the unpaid balance of the mortgage, or up to 10 years whichever occurs first. We should start offering these terms to people who want to buy foreclosed homes first, to eliminate the foreclosure inventory. We should then make the new mortgage available to all conforming priced homes after the maximum about of the mortgage the government will guarantee is lowered. These terms would only be available to owner occupied single family homes. The Zero Inflation Taxation Policy should be enacted first before the new mortgage is offered to the public.
    Basically the Zero Policy works like this: As inflation begins to occur, the tax on interest earned on debt investments and savings would decrease, based on the true annual inflation rate. At the same time, the interest tax deduction would decrease based on the true annual inflation rate. In this way the excessive use of credit during the inflation cycle would decrease. The value of money would increase during the inflation cycle, without increasing cost, and the price structure of our economy.
    Fannie Mae and Freddie Mac have no trouble securitizing and selling the 5/1 ARM. The new mortgage is designed to decrease defaults and the Zero Inflation Taxation Policy is designed to stabilize long term interest rates, to help eliminate interest rate increase risk. Therefore Fannie Mae and Freddie Mac shouldn’t have any problem securitizing the new mortgage, and selling the securities. If they do have problems with sales, the Fed should sell their existing agency securities, (they will go up in value after the new mortgage is offered to the public), and purchase the new securities. The Fed should hold the new securities until the interest rate increases on the mortgages to above the 10yr US Treasury note rate an then sell them. The new mortgage securities will be more appealing to investors because the interest rate will be increasing .25% a year were as the 10 year treasury will not have this benefit. The 10 treasury note will also not be have the benefit of the Zero Inflation Taxation Policy.
    What will the new mortgage terms do for the economy? What will the new mortgage terms do for the economy? They will improve the housing market, stabilize prices and then prices will slowly rise. They will improve the financial condition of Fannie Mae and Freddie Mac, which will save taxpayers billions of dollars. The new mortgage terms will increase people’s disposable income and confidence, which will increase aggregate demand, decreasing unemployment and foreclosures. Less people will be government dependent. More taxes will be collected as the economy improves and people go back to work. As we reduce our deficit, the dollar will strengthen. Oil prices will decrease. Transportation fuel prices will come down. Production cost will decrease. The foreclosure inventory will be sold quickly to owner occupied owners.
    The Great Recession was created by the excessive use of credit. To help prevent the excessive use of credit and increase the saving rate, when equity prices are rising too quickly, we need to enact the Zero Inflation Taxation Policy to help maintain economic balance in our economy. With the Zero Inflation Taxation Policy enacted, long term interest rates will stabilize and not be prone to rising, which will create another recession. Stable interest rates and full employment will improve our nation’s standard of living and bring prosperity to our economy. Our economy will become more productive. Less “paper profits” will be created. Our savings will not be used to make inflation psychology driven investments and purchases, which helps create higher prices.
    Leonard C. Tekaat is a retired economic analyst and scholar, with over forty years’ experience in the world of home financing. He is the Chairman of a special Committee for Economic Reform and a Better Economic Future. For more information go to: Many economists will tell you that the depressed condition of the primary housing market is one of the main reasons the economy has not fully recovered. The unemployment and foreclosure crisis has been put on a back burner because so far no one has presented a good solution for it. I believe if we empower the people with the tool they need, they will bring about their own economic recovery without the government increasing its debt.

    We created the current financial crisis when the middle class and other people were offered and they accepted mortgage terms that were destined to create economic defaults. The collapse of the primary housing market destroyed an enormous amount of the middle class’s disposable income and confidence. This is what had to be repaired before roads and bridges were repaired to increase economic activity.

    We are in a very critical period of the current economic turmoil. The government’s deficit spending programs have not been very successful in improving the economic condition of Main St. This is where the private sector has the power to succeed, where the government has failed by working alone. I believe we need new mortgage terms made available to almost all primary homeowners, not just for people that are having financial trouble. Mortgage terms that will help all of the middle class and other people succeed financially. The middle class is so large, if they succeed financially, the nation’s financial condition will improve.

    The new mortgage terms should be similar to the current 5/1 Adjustable Rate Mortgage, but with the following changes. The starting interest rate should be 3%. The interest rate would increase .25% per year. The interest rate would stop increasing at 5%. The down payment would be 10%. A lower down payment would require mortgage insurance. New purchases and refinances would qualify at 5%, with a 3% starting interest rate, so we reduce the chance of new defaults. To solve the underwater mortgage problem, underwater mortgages should be reduced an additional 30% of the monthly principal and interest payment each month until the value of the home equals the unpaid balance of the mortgage, or up to 10 years whichever occurs first. We should start offering these terms to people who want to buy foreclosed homes first, to eliminate the foreclosure inventory. We should then make the new mortgage available to all conforming priced homes after the maximum about of the mortgage the government will guarantee is lowered. These terms would only be available to owner occupied single family homes. The Zero Inflation Taxation Policy should be enacted first before the new mortgage is offered to the public.

    Basically the Zero Policy works like this: As inflation begins to occur, the tax on interest earned on debt investments and savings would decrease, based on the true annual inflation rate. At the same time, the interest tax deduction would decrease based on the true annual inflation rate. In this way the excessive use of credit during the inflation cycle would decrease. The value of money would increase during the inflation cycle, without increasing cost, and the price structure of our economy.

    Fannie Mae and Freddie Mac have no trouble securitizing and selling the 5/1 ARM. The new mortgage is designed to decrease defaults and the Zero Inflation Taxation Policy is designed to stabilize long term interest rates, to help eliminate interest rate increase risk. Therefore Fannie Mae and Freddie Mac shouldn’t have any problem securitizing the new mortgage, and selling the securities. If they do have problems with sales, the Fed should sell their existing agency securities, (they will go up in value after the new mortgage is offered to the public), and purchase the new securities. The Fed should hold the new securities until the interest rate increases on the mortgages to above the 10yr US Treasury note rate an then sell them. The new mortgage securities will be more appealing to investors because the interest rate will be increasing .25% a year were as the 10 year treasury will not have this benefit. The 10 treasury note will also not be have the benefit of the Zero Inflation Taxation Policy.

    What will the new mortgage terms do for the economy?
    What will the new mortgage terms do for the economy?
    They will improve the housing market, stabilize prices and then prices will slowly rise. They will improve the financial condition of Fannie Mae and Freddie Mac, which will save taxpayers billions of dollars. The new mortgage terms will increase people’s disposable income and confidence, which will increase aggregate demand, decreasing unemployment and foreclosures. Less people will be government dependent. More taxes will be collected as the economy improves and people go back to work. As we reduce our deficit, the dollar will strengthen. Oil prices will decrease. Transportation fuel prices will come down. Production cost will decrease. The foreclosure inventory will be sold quickly to owner occupied owners.

    The Great Recession was created by the excessive use of credit. To help prevent the excessive use of credit and increase the saving rate, when equity prices are rising too quickly, we need to enact the Zero Inflation Taxation Policy to help maintain economic balance in our economy. With the Zero Inflation Taxation Policy enacted, long term interest rates will stabilize and not be prone to rising, which will create another recession. Stable interest rates and full employment will improve our nation’s standard of living and bring prosperity to our economy. Our economy will become more productive. Less “paper profits” will be created. Our savings will not be used to make inflation psychology driven investments and purchases, which helps create higher prices.

    Leonard C. Tekaat is a retired economic analyst and scholar, with over forty years’ experience in the world of home financing. He is the Chairman of a special Committee for Economic Reform and a Better Economic Future. For more information go to: http://www.foreclosurecrisissolved.wordpress.com and the other linked websites

  • Jlongobardi530

    I just have two comments that are somewhat related to this topic. As a Lender, we are required to be licensed and go through rigorous testing and background checks. Bank employees and FDIC insured FI/LIs, although having their background check for employment, are not required to be licensed,tested or have a state and FBI background check. I think they should not be exempt from such scrutiny. The playing field should be even.

    Under the same topic, as lenders, we are required to provide various disclosures that need to be accurate. I have had consumers email me costs workup sheets from banks that do not have to be as accurate (or really accurate at all) as our GFE and Preliminary HUDs. So banks can continue to play the game of under disclosing and leaving off fees because they are not required to provide the borrower’s with GFEs.  Borrowers are then – not comparing apples to apples, and the system that has been created has allowed a loophole for banks and FDIC insured FIs. I know we have to fight for sales these days but the system currently in place has set up ways banks can get around providing full disclosures.  

    • Jwshel56

      Plug ALL the loopholes for the Banks.  Quick. They will run with anything and everything they
      can to put more of our $$$$ in their pockets before someone catches on.

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