An Important Message from CAMB President Pete Ogilvie, CMC and CAMB GA Chair Ed Smith, Jr.
Thank you for your support as the House of Representatives considered H.R. 3915 this week. Your GA Team is working hard for CAMB in Washington, DC and we have made good progress, even with members of Congress from states other than California. The two main issues we have worked with NAMB to push are to make modifications to the anti-steering provision in Title I and to eliminate or change the definition of high cost loans in Title III. The bill passed in the House on November 15, 2007 by a vote of 291 to 127.
Anti-Steering Provision in Title I
Our main goal in Title I was to preserve the ability for YSP to be used to help a borrower finance fees and closing costs and to ensure a level playing field for all mortgage distribution channels. As you know by now, our behind the scenes efforts to modify Title I resulted in changes to clarify that the provision refers to all forms of incentivized compensation and gain on sale, not just YSP and that the originator can receive compensation from the lender through the rate. These changes were included in a floor amendment offered by Chairman Frank and Ranking Member Bachus. The amendment passed by voice vote.
CAMB's GA Team was instrumental in helping to achieve this important language change to Title I. As you know, Congressman Gary Miller (R-CA) secured a commitment from Chairman Frank at the markup to clarify the anti-steering provision prior to floor consideration of H.R. 3915. Following the markup, a strong contingent of Democrat members, including Congressman Brad Sherman (D-CA), sent a letter to Chairman Frank urging for clarifications to be made to the anti-steering provision. Behind the scenes, CAMB secured help from Housing Subcommittee Chairwoman Waters (D-CA) to clarify the anti-steering language. CAMB also worked with the three relevant Ranking Republicans on the committee (Full Committee Ranking Member Spencer Bachus (R-AL), Financial Institutions and Consumer Credit Subcommittee Ranking Member Judy Biggert (R-IL), and Housing and Community Opportunity Subcommittee Ranking Member Shelley Moore Capito (R-WV)) to send their own letter to Chairman Frank in support of Congressman Miller's amendment. In fact, these offices were helped in their understanding of the YSP issue by the handout prepared by CAMB President Pete Olgilvie and by GA Chair Ed Smith's in-person explanation about how the YSP is used by consumers. Through both of these modes of communication, CAMB helped key members and staff to understand the need to preserve the YSP in order to help borrowers.
Definition of High Cost Loans in Title III
Title III of H.R. 3915 significantly expands the scope of loans that qualify as "high-cost loans" or HOEPA loans. In particular, the point and fee calculation is lowered from 8 percent to 5 percent, which would include prepayment penalties, yield spread premiums and most bona-fide discount points. By lowering this threshold, a much larger number of loans will be captured than under the previous definition in current law. Title III also prohibits the financing of points or fees on "high-cost loans" covered by HOEPA. Most points and fees on non-prime loans are financed, because most non-prime borrowers do not have ready access to the cash needed to pay such points and fees. This restriction, if enacted, would effectively eliminate from the market all borrowers who cannot qualify for a "non-high cost" mortgage, and who are unable to afford the significant upfront costs associated with obtaining a mortgage loan.
By expanding the scope of loans covered by HOEPA, Title III will further limit mortgage liquidity. Reducing the trigger to 5 percent and including all costs and fees in this calculation will drastically shrink the availability of mortgage credit. Under current law, due to the liabilities extended to HOEPA loans, these loans are rarely made, funded, or purchased by the secondary market. The significantly lower HOEPA threshold will prevent legitimate mortgage lending and put homeownership out of the reach of many individuals.
On Title III, we have all along been less optimistic that a compromise could be reached prior to floor consideration. Congressman Gary Miller submitted an amendment to the Rules Committee to modify Title III. During the committee markup of the bill, he was able to secure a commitment from Chairman Frank that they would work together to modify Title III. While Congressman Miller is in agreement that it would be best for consumers if the entire Title were stricken from the bill, Miller worked to find an achievable and winnable compromise. Unfortunately, the Rules Committee did not accept Congressman Miller's amendment to be debated during House floor consideration. Some have speculated that the Rules Committee's denial was due to the expectation that Miller's amendment would have likely passed. Instead, the Rules Committee accepted an amendment offered by Congressman Patrick McHenry (R-NC) to strike Title III completely. This amendment failed on the House floor by a vote of 168 - 245. However, Gary Miller was again able to secure a public commitment from Chairman Frank on the House floor that modifications would be made to this section of the bill as the legislative process continues.
As this historic issue continues to make its way through the federal legislative process, your CAMB GA Team will continue to keep you informed on relevant issues.
Members Please 
