FAMB Government Affairs Update
August 1, 2005

First, the Good News …

Small Business Heath Fairness Act

The U.S. House of Representatives passed the Small Business Health Fairness Act. This legislation will increase the ability for Mortgage Brokers to have options to purchase Group Health Insurance.

For the Small Business Health Fairness Act to become law, the U.S. Senate needs to pass this legislation too. The Small Business Health Fairness has good support in the Senate and if it is allowed to come to a vote will probably pass.

Senator Mel Martinez supports and is a co-sponsor of this legislation. Mortgage Brokers need to ask Senator Martinez to work to bring this important legislation to a vote in the U.S. Senate.

Senator Bill Nelson does not support the Small Business Health Fairness Act. Florida Mortgage Brokers need to ask Senator Nelson to allow this legislation to be voted on in the U.S. Senate.

President Bush supports the Small Business Health Fairness Act.

And Some Not So Good News … RESPA Reform Update

HUD has renewed its efforts to Reform RESPA. It is holding three roundtable meetings to hear from Mortgage Industry Leaders and Consumer Groups. The National Association of Mortgage Brokers has been invited to all three of these roundtable meetings.

In addition to the three HUD sponsored roundtable meetings, The Small Business Administration (SBA) will be holding three RESPA Meetings too.

· Initially HUD Secretary Jackson promised that before HUD puts pen to paper, they will carefully consider the input from consumers and industry alike. This implied HUD intends to take a fresh look at improving the mortgage settlement process and the starting point for the Road To Reform is not the point where RESPA Reform ended in 2004.

· After hearing from Mortgage Industry Leaders and consumer advocates, the nation's housing secretary cautioned participants in HUD's third public RESPA forum that, although the government values their input, "this is not negotiated rulemaking." Department of Housing and Urban Development Secretary Alphonso Jackson reminded industry executives and trade group representatives that, "We all realize that there has to be change" when it comes to the Real Estate Settlement and Procedures Act.

It sounds like HUD Secretary Alphonso has made up his mind there will be RESPA Reform … No matter what he learns from Mortgage Industry Leaders and consumer advocates.

Here are highlights of mortgage legislation and regulation being followed by FAMB’s Government Affairs Committee.

1. RESPA Reform Proposals from HUD – After simmering for a little over a year, HUD has turned up the heat on RESPA Reform.

· HUD Secretary Jackson said there is universal agreement that current regulations can and should be improved to allow even more families to enjoy the American Dream. However, at a roundtable meeting sponsored by HUD and attended by Mortgage Industry leaders and groups representing consumers, the consensus seemed to be there was no need for sweeping changes to the mortgage settlement process.

2. Reform of Fannie Mae and Freddie Mac, also known as GSE Reform –

· A government-sponsored-enterprise reform bill approved by the Senate Banking Committee retains strict GSE portfolio limits and a requirement for prior approval of any new GSE programs and services.

The committee left unchanged the measure’s treatment of desktop underwriting programs in use by Mortgage Brokers.

This legislation, S.190, was approved on a vote of 11-9 along party lines. Members on both sides are hoping that the August recess can be used to work out differences before the measure reaches the floor this fall.

· Treasury Secretary John Snow on Friday issued a statement praising the government-sponsored-enterprise reform bill that was approved by the Senate Banking Committee on July 28.

Though Snow acknowledged that the bill, S. 190, “differs in some respects from the Administration's proposals,” he said it does offer real reform and seeks to create “a stronger, more effective regulator” to provide oversight for GSEs.

The Companion House measure, H.R. 1461, was approved by the House Financial Services Committee May 25.

H.R. 1461 and S. 190 Legislation may limit access by Mortgage Brokers to Fannie Mae and Freddie Mac automated underwriting systems. Mortgage Brokers rely on these systems to quickly assess a mortgage application and provide consumers with mortgage credit.

3. Trade Associations Health Care Coverage – (S. 406 and H.R. 525) The "Small Business Health Fairness Act" would give small business the same bargaining power of big business in the health care arena.

4. Responsible Lending Act – (H.R. 1295) This legislation was introduced by Reps., Bob Ney, R- Ohio, and Paul Kanjorski, D-Pa., to protect consumers against predatory lending practices through revisions to federal statutes affecting lenders, brokers and appraisers.

This legislation includes provisions that will increase the number of loans considered as section 32 (High-Cost Loans) and provides for a Federal Registry for only Mortgage Brokers.

5. Affiliated Business Arrangements, ABAs and One Stop Shops – This issue involves the legality of homebuilders requiring or inducing homebuyers to use mortgage companies affiliated with the builder.

· Another state’s Insurance Commissioner announced recently that three title insurance companies had agreed to quit paying what he called bribes to get referrals from builders, lenders and real estate brokers, he posed a question to the housing industry.

If the title insurers -- firms he regulates under state law -- had made illegal payments to get business, what action should or could be taken against the recipients of those payments, including prominent home builders and major banks that don't answer to the state insurance commission?

"I regulate the title companies that paid the bribes," the Insurance Commissioner said in an official statement. "But on the other side are the people who accepted the bribes, and they are not under my regulatory authority."

The Insurance Commissioner named 17 home builders, four banks and 22 real estate firms as recipients of these kickbacks. Many of them were contacted seeking comment on his allegations, but those calls largely went unanswered.

· Meanwhile in Washington, the Department of Housing and Urban Development regulates all parties on both the giving and receiving end of these transactions and is investigating the practice of captive reinsurance. This practice is undergoing scrutiny by insurance regulators in at least 15 states.

"We are looking at this issue, but so far we have no action to announce, '' said HUD spokesman Brian Sullivan, adding, "captive title reinsurance is relatively new."

6. The U.S. Department of Labor Administers the Fair Labor Standards Act – and its affect on compensation to commissioned mortgage employees.