FAMB Government Affairs Update
February 2, 2006

Date to Remember - Florida Mortgage Broker’s Tallahassee Lobby Day

March 14, 2006

· Legislative Office Visits during the day and

· A reception at the Governors Club in the evening

Summary of a note from Jamie Wilson, FAMB’s lead contact with our Lobby Firm, Dutkp Poole McKinley writing about FAMB’s reception scheduled at the Governors Club on March 14, 2006

According to new guidelines for Florida’s Legislators, Legislators and their staff can stop by any function as long as they don’t eat or drink. If the Legislators or their staff eat or drink, they must pay themselves.

Legislators still want to see their constituents and I believe they will still come by…although the amount of time they spend will likely be reduced.

We…Dutko Poole McKinley as well as FAMB members from around the state…will have to work a little harder to make sure all the members know about the event and will stop by.

U.S. Senator Richard Shelby Wants FEMA Overhaul

Senate Banking Chairman Richard Shelby, R-Ala., said the National Flood Insurance Program needs revamping in the face of some $23 billion in costs from last year’s hurricanes.

David Maurstad, acting director of mitigation at the Federal Emergency Management Agency, delivered a report to the banking panel noting that the NFIP, which FEMA runs, was never designed to be actuarially sound and has had to borrow billions to cover what it hasn’t been able to collect in premiums to cover flood losses.

Congress raised FEMA’s borrowing authority last year from $1.5 billion to $18.5 billion through fiscal 2008, but that falls short of what will be needed just to cover last year’s disasters. Shelby noted that, if there are no major floods, it will take FEMA decades or longer to repay the funds borrowed to cover Katrina.

Lawmakers are looking at whether to reduce subsidies in some areas—a step that could raised premiums for the average policyholder about $1,100 a year. Also under review is a revamping of the flood insurance maps, which didn’t recognize a lot of last year’s hurricane-hit areas as major flood risks.

One idea is to change the maps to cover areas subject to 500-year floods vs. 100-year, as is the current standard. Congress has also been looking to cut off homeowners from NFIP coverage if they are subjected to repeated flood losses and decline flood-mitigation steps recommended by FEMA. Senators Elizabeth Dole, and Robert Menendez, R-N.J., raised concerns about such a cut-off.
Alan Greenspan Reiterates Stance on GSE Reform

Federal Reserve Board Chairman Alan Greenspan, who left the Fed Jan. 31, told the Senate authors of a housing government-sponsored enterprises reform package that their bill would help refocus Fannie Mae and Freddie Mac on their public policy mission and help prevent systemic risk.

Three U.S. Senators, John Sununu, R-N.H., Chuck Hagel, R-Neb., and Elizabeth Dole, R-N.C., said Congress should provide “unambiguous” guidance on the growth of the GSEs’ investment portfolios. He supports S.190’s provision of specific targets for those portfolios.

The Senate bill, S.190, was reported out by the Senate Banking Committee last July on a party-line vote of 11-9 and differs in key respects from the House-passed H.R. 1461.

As urged by FAMB, H.R. 1461 and S.190 both preserve Mortgage Brokers ability to keep using desktop underwriting programs in their work with Fannie and Freddie to provide home loans.

The two measures differ, however, in their treatment of the GSE portfolios: While S.190 would set specific limits, H.R. 1461 would authorize the new GSE regulator to set limits as needed for safety-and-soundness purposes.

Greenspan, in his Jan. 3 letter, said relying on the future regulator to oversee the portfolios “without providing that regulator with specific and unambiguous congressional guidance is unlikely to succeed in directing these portfolios toward their important public purposes.”

This is made more important by GSE reform, he said, as the legislation could worsen potential systemic problems leading the public to believe the government more strongly backs GSE debt.

Ben S. Bernanke Replaces Alan Greenspan as Chairman of the Board of Governors of the Federal Reserve System and the Chairman of the Federal Open Market Committee

Ben S. Bernanke on Wednesday became the fourteenth Chairman of the Board of Governors of the Federal Reserve System and the Chairman of the Federal Open Market Committee, succeeding Alan Greenspan. The oath of office was administered in the Board Room at 9:00 a.m. by Vice Chairman Roger W. Ferguson, Jr.

The Senate confirmed Dr. Bernanke as Chairman and as a member of the Board on January 31, following a hearing on November 15 by the Senate Committee on Banking, Housing and Urban Affairs. President Bush announced his intention to nominate Dr. Bernanke on October 24.

Dr. Bernanke’s four-year term as Chairman ends January 31, 2010, and his fourteen-year term as a member of the Board ends January 31, 2020.

State Attorney Generals: Mortgage Brokers’ receiving extra compensation for originating mortgages that carry a higher note rate or extra fees is a concern

Iowa Attorney General Tom Miller is vowing that the states might next tackle the origination practices of loan brokers.

Speaking during a recent news conference, Mr. Miller said Mortgage Broker practices are something we will look at in the future. During the news conference, the participating AGs singled out the compensation practice where the Mortgage Broker receives extra compensation for originating mortgages that carry either a higher note rate or extra fees. The term used by the Attorney Generals to describe this action is “Up-Selling”

Other Legislative and Regulatory Issues

These issues include: RESPA Reform, Fannie Mae and Freddie Mac Reform, Small Business Health Fairness Act, Predatory Lending Legislation, The Home Mortgage Disclosure Act, Affiliated Business Arrangements and Fair Labor Standards.

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

· Since the conclusion of HUD’s RESPA Reform Roundtables held this summer, there has been no definitive word from HUD on the timing or content of their HUD RESPA Reform proposals.

* Comment from HUD to FAMB …“Since the roundtables, HUD has received numerous comments from various representatives of the industry. Before proceeding with a final rule, you can be assured that interested parties will have ample opportunity to provide the Department with additional comments.”

2. Reform of Fannie Mae and Freddie Mac, also known as GSE Reform – 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. Small Business Health Fairness Act – (S. 406 and H.R. 525) - The Small Business Health Fairness Act is Federal Legislation that has passed the U.S. House of Representatives and is awaiting action in the U.S. Senate. This legislation will allow small businesses and the self-employed obtain group insurance through their trade associations. If passed, this legislation will give Mortgage Brokers and other small businesses access to another source for Health Insurance.

· Florida Senator Martinez supports The Small Business Health Fairness Act and is a co-sponsor of this legislation.

· Florida Senator Nelson is not a co-sponsor of The Small Business Health Fairness Act, and seems opposed to this legislation.

The Small Business Health Fairness Act is stalled in the U.S. Senate. Contact your U.S. Senators and ask them to vote on The Small Business Health Fairness Act.

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 Mortgage Brokers. That’s right, not all mortgage originators, Just Mortgage Brokers.

5. Home Mortgage Disclosure Act

In a speech before the Consumer Bankers Association 2005 Fair Lending Conference, FED Governor Mark Olson made the following statements as his conclusion. He promoted the importance of competition in free and open markets to help reduce consumers’ loan costs.

“It is also important to maintain perspective. The inherent limitation of the HMDA data collection must be understood if it is to promote market efficiency and legal compliance. It is not intended to discourage lenders from entering or remaining in higher risk segments of the market. Ultimately, the cost of credit to higher-risk borrowers is lower when there is a competitive marketplace.”

6. State Attorney Generals: Mortgage Brokers’ receiving extra compensation for originating mortgages that carry a higher note rate or extra fees is a Concern

Iowa Attorney General Tom Miller is vowing that the states might next tackle the origination practices of loan brokers.

Speaking during a recent news conference, Mr. Miller said Mortgage Broker practices are something we will look at in the future. During the news conference, the participating AGs singled out the compensation practice where the Mortgage Broker receives extra compensation for originating mortgages that carry either a higher note rate or extra fees. The term used by the Attorney Generals to describe this action is “Up-Selling”

7. 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.

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