My New Mortgage Blog

The National Association of Mortgage Brokers, responding to criticism of the mortgage brokerage industry by Sen. Hillary Rodham Clinton, D-N.Y., has criticized the senator for advocating policies that "single out small business America" and called instead for an examination of the entire mortgage system. "The entire mortgage system needs to be examined from stem to stern -- from the home shopping phase, bankers, brokers, and lenders all the way to Wall Street and the rating agencies," the NAMB said in a statement. "NAMB welcomes Sen. Clinton's proposal to create a registry database, but it needs to go one step further -- it should be applied to all mortgage originators, not just mortgage brokers." In a recent speech, Sen. Clinton called for upfront disclosures of mortgage brokers' compensation, a ban on prepayment penalties, and a requirement that all subprime mortgages have escrow accounts. Regarding disclosures, the NAMB noted that it has also called for reform, pointing to Federal Trade Commission studies suggesting that "our entire mortgage disclosure system is broken and it needs a comprehensive fix." The association can be found on the Web at http://www.namb.org.

Sen. Hillary Clinton: Disclose Broker $, Ban Prepay Penalties                         

To crack down on abusive lending, Sen. Hillary Rodham Clinton, D-N.Y., wants upfront disclosures of a mortgage broker's compensation and a ban on prepayment penalties, along with a requirement that all subprime mortgages have escrow accounts.  "We need to put an end to fly-night-night mortgage brokers peddling loans to unqualified applicants based on inflated appraisals," the Democratic presidential candidate said in a speech outlining legislative proposals she intends to introduce when Congress returns in September. Her legislation will also provide $1 billion to assist state-sponsored foreclosure rescue funds and expand Fannie Mae's and Freddie Mac's mission to include helping at-risk homeowners avoid foreclosure. "If I were president, I would address abuses across the mortgage industry with a plan to curb unfair lending practices and hold brokers and lenders accountable, give families the support they need to avoid foreclosure, and increase the supply of affordable housing," the New York senator said.

Freddie has issued a $105.6 million subprime mortgage-backed security as part of its $20 billion commitment to Congress to provide liquidity to the subprime market and safer underwriting standards. The subprime and alternative-A loans originated by Wells Fargo Home Mortgage include fixed-rate products along with adjustable-rate 2/28 mortgages. The maximum margin on the ARMs is 450 basis points. One group of loans in the Freddie Mac structured pass-through security (Series T-074) has FICO credit scores ranging from 550 to 752 with a weighted average score of 613. Freddie spokesman Brad German said loans have a wide range of credit scores, loan-to-value ratios, debt-to-income ratios, and other characteristics. He said Freddie does not have a cookie-cutter model with every detail worked out. But the secondary-market agency will work with lenders in putting loan pools together that meet a certain risk profile. "The prospectus will give the market a strong idea of what we are looking to buy," Mr. German said.