FAMB Government Affairs Update
February 1, 2007

January Special Session on Insurance

The State legislature was in full force in January as part of a special session on Insurance and the legislature did wind up passing a set of Property Insurance reforms. For your convenience, a summary of the legislation provided to all members of the legislature as detailed by the Majority Whip in the Florida House of Representatives can be accessed by going to www.myflorida.com. Governor Crist has now signed it into law.

Mortgage Brokers Prepare for Tallahassee Lobby Days

Pre-Planning for the Tallahassee Legislative event in March has begun. Task Force Chair Jerry Collyer and his committee will meet and make recommendations to the Government Affairs Chair, Paul Halter, as to talking points and procedures. In the near future, pre-event instructions and materials will be distributed to each chapter. Finally, the committee will confirm with each chapter's representative on the Government Affairs committee in order to insure that the legislature is ready to see us.

Review of Quarterly Government Affairs Committee Meeting (January 2007) - Paul Halter, Government Affairs Chair

FAMB's Lobbyist Jamie Wilson did some basic education as to when bills are created and when we must begin our comments. This bill creating process starts right after the election and we are tracking 9 such bills that could change how we do business and the number is expected to increase. By the time the session begins, most bills will have numbers, sponsors etc. There is a limit to the number of bills each congressman can submit with a maximum of 5 for the house. The Senate has no maximum. Jamie Wilson also previewed state issues and bills that are currently active such as Fraud bills. This will be a busy year in Tallahassee.

On January 2nd 2007, FAMB President Patrice Yamato, State Past President Steve Schneider, FAMB Attorney Steve Ecenia and FAMB Lobbyist Jamie Wilson met with the Department about the office’s proposed major revisions to 494. Without exception, our team got the job done. We already have a revision of the revision written of 494 and provided our feedback to the department via conference call on January 24, 2007. This shows that they heard our critical review of the proposal and have responded with changes. There are still some major issues but we think they will take our suggestions and make 494 revisions beneficial to our industry. Joe Falk also gave training on “Lobby 101” and gave us an update of how things are in Washington. Hope to see everyone in Washington for the 2007 Legislative & Regulatory Conference. This is great time to check into your legislative issues with a Democratic- controlled congress verses a Republican-controlled congress. Great conference and very educational as well.

GET your two cents in on issues facing our industry and new legislation!!

We are well positioned for protecting our industry which is our primary goal but we truly need everyone’s input. When grass roots are needed we are synchronizing our RESPA Reform / Legislative Notice Response Subcommittee for this purpose. Scott Tennell chairs this expanded subcommittee. All Chapters have one member on this very important group. Watch for opportunities to give them your feed back.

Standards on mortgage 'suitability' gain support

For the American mortgage market, it could be the hottest buzzword of the year: Suitability. That's because Congress has a new top legislator for mortgage matters, Rep. Barney Frank, who believes that "you shouldn't lend (homebuyers or refinancers) more than they can afford to pay back, and you don't lend them more than their house is worth." Frank, a 14-term Massachusetts Democrat, is the new chairman of the House Financial Services Committee - the primary originator of banking and mortgage-related federal legislation. In an interview, he made it clear that a top priority this year will be enactment of a nationwide lending-standards law designed to protect consumers from deceptive, unfair and predatory mortgage practices. With foreclosures rising and many credit-stressed homeowners facing imminent rate resets on controversial "payment- option" and other adjustable-rate loans, pressure is building on Capitol Hill for tougher rules for mortgage brokers and lenders.

A recent study by the Center for Responsible Lending predicted that as many as 1 of every 5 sub-prime borrowers who took out reduced-payment, low- documentation mortgages between 1998 and mid- 2006 could ultimately lose their homes because of steep payment increases and penalties they can't handle. Proponents of a suitability standard would require loan officers - whether mortgage brokers or retail lenders - to make certain that applicants are financially capable of handling a particular loan before and after payment increases, and that they fully understand the cons as well as the pros of the mortgage type they select. "It's nothing more than an appropriateness test," said John Taylor, CEO of the National Community Reinvestment Coalition. "Lenders need to be absolutely certain that the loan they're putting somebody into really makes sense ... not just that it makes money for the lender or broker," Taylor said. Stockbrokers have been required for decades to make suitability determinations when customers seek a specific trade or investment. Under securities-market rules, even if a brokerage customer has expressed interest in a transaction, the broker should not recommend it if the broker knows it is too high-risk for the client's financial situation or level of sophistication. The analogue for the mortgage market might be: Even if applicants are willing to sign up for home loans that are clearly beyond their financial capabilities or knowledge, the loan officer should not go along.

According to a white paper issued by the nonprofit Northeast-Midwest Institute, a new national standard might require loan officers to determine an applicant's suitability for a particular loan program based on:

• Employment status, income level, assets and likelihood that income or employment could change.
• Other recurring expenses and the impact they could have on the borrower's capacity to repay.
• The potential for higher future monthly payments based on the structure of the loan program itself.

A suitability standard might also prohibit brokers and others from steering less-sophisticated borrowers to higher-cost mortgages than those for which they could otherwise qualify, such as pushing them into risky and complicated sub-prime loans when they could qualify for prime rates and simpler programs. Steve O'Connor, a senior vice president for the Mortgage Bankers Association, says that while "every loan officer has the responsibility to make sure a borrower has the capacity to repay the loan," a federally imposed suitability standard inherently would be "vague and subjective," and would limit borrowers' ability to shop for mortgages that fit their objectives as they - not a loan officer - see them. Roy DeLoach, executive vice president of the National Association of Mortgage Brokers, said, "The consumer ultimately is the only person able to choose the mortgage most suitable to [his or her] specific and unique circumstances." Worse yet from a mortgage lending perspective, DeLoach said, a suitability test "could lead to accusations of discrimination. [It] would blanket mortgage originators with the fear of being sued, cause a number of good loans to be declined, and lead to limiting access to credit." Frank, the Massachusetts Democrat who heads the House Financial Services Committee, said the specific elements and tests involved in creating national consumer protection standards for the mortgage field are still under discussion. One bedrock principle he thinks will be essential, however: stricter liability for brokers, lenders and the bond investors who buy pools of mortgages. According to Frank, "You can't just make a loan and then sell it" to investors, forget about it and expect no legal liability for putting people into a mortgage that never made sense for their situation.