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2008 S.A.F.E. Mortgage Licensing Act

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Mike Kennedy

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Certified Residential Appraiser
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New York
http://www.washingtonwatch.com/bills/show/110_SN_2595.html :clapping:


one reaction so far: AI Newsletter

CSBS Model Bill Incorporates Appraiser Independence Provision
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To ensure that the mortgage lending industry is operating without “unfair, deceptive, and fraudulent practices on the part of mortgage loan originators,” the Conference of State Bank Supervisors has introduced the SAFE Mortgage Licensing Act of 2009, a model bill for state legislatures to consider.

Under the provisions outlined in the model legislation, an effective system of supervision and enforcement of the mortgage lending industry would be established to oversee the licensing of mortgage originators to ensure that individuals performing services related to mortgage origination are held accountable for their actions.

Highlights of the model legislation are as follows:
-The creation of a nationwide mortgage licensing system and registry to be developed and maintained by the CSBS and the American Association of Residential Mortgage Regulators for the licensing and registration of licensed mortgage loan originators.
-The establishment of an application process, including background checks, for those wishing to become mortgage originators.
-The setting of minimum educational requirements and development of competency tests.
-The granting of enforcement authority to ensure that loan originators who violate industry standards are punished accordingly.

“The Appraisal Institute is pleased to see the introduction of model legislation that promotes appraiser independence,” said Bill Garber, director of Government and External Relations for the Appraisal Institute. “The protection of consumers seeking mortgage loans is essential to restoring trust in the lending process.”

Under the timeline developed by CSBS, the effective date of the SAFE Mortgage Licensing Act will be July 31, 2009
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Randolph Kinney

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Gee, all the lying, cheating, stealing and out right fraud was okay. No law or license or regulation to prevent the problem.

Whew! Problem fixed. :new_smile-l:
 
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Gee, all the lying, cheating, stealing and out right fraud was okay. No law or license or regulation to prevent the problem.

Whew! Problem fixed. :new_smile-l:

I hear ya bro. One thing I find interesting is that after it became widely known that banks/brokers, etc. were selling bad paper to end user investors, is why have not these investors set up their own underwriting and appraisal review departments as a final safety check before purchasing an expensive mortgage. That is not something that requires government, but is just prudence on the part of the investor who may get stuck holding the bag.

As the public becomes more aware of the utter fraud and uselessness of AMC's, then pressure from the investors should produce more honest underwriting and appraisals, particularly if the parties who are originating the loans know the end investor will do their own due diligence. The free market should eventually correct this problem..........there is already too much government interference.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
I hear ya bro. One thing I find interesting is that after it became widely known that banks/brokers, etc. were selling bad paper to end user investors, is why have not these investors set up their own underwriting and appraisal review departments as a final safety check before purchasing an expensive mortgage. That is not something that requires government, but is just prudence on the part of the investor who may get stuck holding the bag.

Most of the paper generated by the crap mortgages were repackaged into securities that were given a respectable credit rating. When S&P, Moodys, Fitch, etc., rate the credit as investor grade, investors (not individuals) bought the junk.

Pension funds, mutual funds, private equity funds, hedge funds and even sovereign wealth funds bought the crap based upon their own investment management's recommendation and approval.

Management earns their fees through the purchase of securities; they don't earn fees for not purchasing securities.

As the public becomes more aware of the utter fraud and uselessness of AMC's, then pressure from the investors should produce more honest underwriting and appraisals, particularly if the parties who are originating the loans know the end investor will do their own due diligence. The free market should eventually correct this problem..........there is already too much government interference.
Actually, the government is the biggest buyer and underwriter of residential mortgages. And, they are penny wise and pound foolish. They don't care about the appraiser or the integrity of the appraisal. They want warranties by the lenders that due diligence was performed and the paper being sold is guaranteed by a repurchase agreement, which lenders cannot fulfill. Hence the HVCC and inserting a third party, the AMC, to give the appearance of propriety between the appraiser and the lender that produces crap paper and a guarantee to buy back the paper if Fannie, Freddie, FHA, etc., can prove the lender did not live up to the warranty.
 
Joined
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Ohio
Randolph Kinney Qoute: "Most of the paper generated by the crap mortgages were repackaged into securities that were given a respectable credit rating. When S&P, Moodys, Fitch, etc., rate the credit as investor grade, investors (not individuals) bought the junk."

I understand that, but going forward, if I was an investor, I would not purchase any MBS etc. without additional verification that the mortgage information was factual and accurate. I also agree that when you have allegedly respectable credit rating services lie about the credit rating of certain securities, that most people will assume the services are honest and not bother to check behind them. We now know that almost everyone in the financial sector is crooked and only looking out for themselves. A prudent investor or fund manager, henceforth, should now make an extra effort to check that what they are buying IS what they are buying.
 

Randolph Kinney

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Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
This problem of residential mortgages and related products have broken this system from banking to Wall Street to insurance companies to pension plans.

No longer will securitized private debt be accepted by investors. It is not the problem of the investor to prove the quality and creditworthiness of the security. That is easily handled by avoiding any such security as a candidate for investment. Investors want safe and liquid investments. That is why Treasury paper can be sold at the exclusion of private paper.

The government has to guarantee private paper in order for it to be accepted by investors and with out that guarantee, there is no market for it.
 

Walter Kirk

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Jun 24, 2003
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Licensed Appraiser
State
New Jersey
This will probably "improve" mortgage lending the way licensing "improved" real estate appraisal.
 

c w d

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General Public
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Florida
They don't care about the appraiser or the integrity of the appraisal. They want warranties by the lenders that due diligence was performed and the paper being sold is guaranteed by a repurchase agreement, which lenders cannot fulfill. Hence the HVCC and inserting a third party, the AMC, to give the appearance of propriety between the appraiser and the lender that produces crap paper and a guarantee to buy back the paper if Fannie, Freddie, FHA, etc., can prove the lender did not live up to the warranty.

This is very well stated and for the most part true. It's all about appearance. But, it begs the question: what's the point of buy back guarantees if the government is just going to bailout the big players giving them the rewards to buy out the smaller players? Where's the penalty for the bad paper? So far, I don't see how the culprits are being penalized.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
This is very well stated and for the most part true. It's all about appearance. But, it begs the question: what's the point of buy back guarantees if the government is just going to bailout the big players giving them the rewards to buy out the smaller players? Where's the penalty for the bad paper? So far, I don't see how the culprits are being penalized.

Well it is like selling insurance; as long as no one dies, you don't have to pay out.

In the case of lending and a forced buy back, it is a double whammy. The lender would have to borrow the funds to execute the buy back at 100 cents on the dollar and then write down the value of what they bought back to pennies on the dollar. If that happens enough times, they are insolvent.

The penalty is that the government is punished for running a poor regulated game. The fix is more regulation and more buy back guarantees.

Don't laugh, it seemed to work the last time, the time before that, and the time before that ... etc.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Fannie Mae Seeks to Force Mortgage Buyback

Fannie Mae is in talks with the Federal Deposit Insurance Corporation and IndyMac to force it to buy back certain mortgages. The discussions involve IndyMac loans sold to Fannie Mae and currently serviced by the bank, according to a statement from the Fannie Mae, the mortgage finance company that was taken over by the F.D.I.C. Regulators seized IndyMac in July after overdue mortgages left it short of cash, leading to a run on deposits. Fannie Mae also is working with the F.D.I.C. to resolve issues related to mortgages bought after the F.D.I.C. took control, Brian Faith, a Fannie Mae spokesman, said in the statement. Fannie Mae and Freddie Mac want lenders to repurchase $1 billion to $10 billion in loans that violated their so-called representation and warranty agreements.

Here is the example that I am talking about. IndyMac was taken over by FDIC, a federal agency. Fannie and Freddie are now demanding buy backs of crappy mortgages from a bank that is run by taxpayers!

Where in the hell do these guys think the money is coming from to buy back mortgages?

And, new crappy mortgage paper was sold to the GSEs after FDIC took over the bank. Where was that due diligence? Was an AMC involved with the new crappy mortgages? :nono:
 
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