U.S. House Passes Sub-Prime Lending Bill By Majority Vote

House passes sub-prime billBy a sizeable margin – 291-127 – the U.S. House of Representatives has passed a bill that presents some serious concerns for bankers. As we’ve noted in Friday’s Banker Direct, the bill represents an attempt by Congress to “do something” about the sub-prime mortgage meltdown. Specifically intended to bring mortgage brokers and mortgage bankers into the crosshairs, the bill also hits regulated financial institutions, including banks, and imposes a new standard of lending on all originators of home mortgage loans.It could have been much, much worse – and was as it was introduced. But that’s like trying to comfort the Nebraska football team after Kansas brought them to their knees by scoring a record 76 points against their defense two weeks ago. The result is still bad.What does it do? Some of the most problematic provisions include:
· Title I: requires licensing or registration for all mortgage originators, and for banks it requires registration of bank employees through their primary regulator;
· Sets a federal standard of care that requires licensing and registration (as noted); presenting consumers with “appropriate” options; the potential borrower has the ability to repay the loan in question; in the case of a refinancing package, there’s a "net tangible benefit" to the borrower; and the loan does not have certain “predatory” characteristics;
· Title II: creates a minimum standard for all mortgages, including consideration of the borrower’s ability to repay and, in the case of refinanced loans, determination by the lender that the borrower has received a ‘net tangible benefit’;
◊ The lender must factor in multiple loans to the same borrower, if the lender knows or has reason to know about such loans; ◊ The loan options presented must be “appropriate” for a particular borrower, given his or her individual circumstances. ◊ Prime loans are given a “safe harbor” and are presumed to meet the minimum standards noted.
· Title III: High-cost mortgage triggers under HOEPA (Home Ownership Equity Protection Act) are lowered to 8 percent over comparable Treasuries (from 10 percent);
· Prohibiting balloon payments, financing of points and fees, and requiring pre-loan counseling.
The Oklahoma delegation voted as follows on final passage: (a “NO” vote is a pro-banking vote).
First District: Sullivan - NO Second District: Boren - YES Third District: Lucas - NO Fourth District: Cole - NO Fifth District: Fallin - NO


Thank you,

Jeff Sargent

Jeff Sargent
President – Residential Mortgage Division
ONB Bank & Trust Co
8908 S Yale Ave, Suite 250
Tulsa, OK 74137
Office: 918.392.6572
Cell: 918.636.0630
Fax: 918.392.6550
jeff_sargent@onbbank.com