Mortgage Choice Act Would Ease Mortgage Qualifications as Foreclosures Jump

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By Jon Anderson

No, I didn’t dig this out of my 2008 file drawer.

According to RealtyTrac, March 2015 saw an 11 percent jump in foreclosures across the U.S. compared to February. That translates into 152,147 homes rocketing down the chute to foreclosure and the loss of people’s homes in the first quarter of 2015. In the nearly 8 years since the housing bubble popped, apmid a white hot market, people are still losing their homes to foreclosure at staggering levels.

And then there’s Detroit: actively depopulating its own city by issuing as many as 62,000 eviction notices this year to homeowners delinquent on their property taxes. It’s being called an eviction “conveyor belt” that will effect one-seventh of Detroit’s remaining population. This, after the 2008 tidal wave of 250,000 people forced out of the city, leaving behind tens of thousands of their homes. The news of Detroit’s rebirth may have been exaggerated.

These are people who managed to hang on to their home through the worst recession in 80-years, only to lose it now.

So what’s the National Association of Realtors’ response? Why to spend $7.7 million on lobbying in the first quarter of 2015 for the Mortgage Choice Act (and complain about rising flood insurance premiums). As benevolent as “Mortgage Choice” sounds, its goal is to weaken the regulatory “burdens” on residential mortgage lending.

Side note: Doesn’t every piece of legislation, PAC/SuperPAC, and fringe group sound benevolent these days no matter now evil it is?

The Mortgage Choice Act passed the House of Representatives on April 14. NAR is not alone in its support, the Mortgage Bankers Association, the National Association of Home Builders and the Real Estate Services Providers Council Inc. (shockingly, all groups who make money directly or indirectly from mortgages).

The bill was originally introduced in 2014 where is passed the House before being rejected by the Senate. If at first you don’t succeed…

What does the Mortgage Choice Act do? It loosens a regulation within Dodd-Frank that capped lending points and fees at 3 percent of the loan. See, if you’re a lending bank and (whoopsie!) also own the title company, both those fees count as part of the 3 percent. But if the lending bank used a title company they didn’t own, the title fees don’t count against the 3 percent (The idea being to separate origination from title).

But the poor, poor un-prosecutable banks want alllll the fees and points in a loan (I mean, why buy the title company in the first place if you can’t skim off their fees?). The “choice” in the Mortgage Choice Act is to allow loan applicants the “choice” to use banks that own title companies AND let those banks blow the 3 percent cap on fees. Essentially a partial return to the hand-in-glove lending that brought us the bubble.

Of course the bill’s supporters herald it as the savior for low-to-middle income mortgage seekers (who seek smaller mortgages). You see, with the 3 percent cap, the BANKS couldn’t make enough profit from loan origination fees when they steered these smaller loans to their own title companies. With tear-stained balance sheets, the banks were forced to send borrowers to title companies they didn’t own (and thus no double dip on fees).

If this bill becomes law, these smaller mortgages can generate the kind of profit margins big banks love.

And that’s the point. ONLY the largest banks own title companies (just a touch monopolistic?).  The consumer always had the option of going to a bank that didn’t own a title company and get the same deal. The applicant qualifications haven’t changed, just how much profit is in it for The Big Banks — the only ones profiting from this legislation.

Pearl of Wisdom: If the only people pushing legislation are those who profit from it, it’s almost guaranteed to be self-serving. Follow the money.

Becoming a Pearl:  If Elizabeth Warren is against it, so should we all.

This column reflects Jon’s own opinion and isn’t the opinion of Agree? Disagree? Leave a comment! For hate mail from those big-old banks, shoot Jon an email. Marriage proposals accepted (as soon as they’re legal in Texas)!

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Jon Anderson

Jon Anderson is's condo/HOA and developer columnist, but also covers second home trends on An award-winning columnist, Jon has earned silver and bronze awards for his columns from the National Association of Real Estate Editors in both 2016, 2017 and 2018. When he isn't in Hawaii, Jon enjoys life in the sky in Dallas.

Reader Interactions


  1. mmCandy Evans says

    Well Jon, I disagree. Dodd-Frank is way too cumbersome and burdensome on banks and believe it or not, banks need to make money when they lend to us. Dodd-Frank is the reason why the middle class found it so hard to get mortgage loans, especially if you are self-employed. I’d like everything to be free, but then that means the government subsidizes, which means taxes, which the wealthy never pay and which fall on the backs of the working and middle class. Mortgage bankers tell me Dodd-Frank is hurting the smaller banks, which is, in turn, hurting the middle class consumer.

    I do like Elizabeth Warren, though, so thanks for letting us know where she stands.

  2. Jon Anderson says

    It’s nice that we can disagree on Candy’s Dirt, except on champagne! I would counter that banks make plenty of profit. Combining the past three fiscal years, BofA reported $20 billion in profits, Wells Fargo $63 billion, JPMorgan $57 billion and Citigroup $28.5 billion. Also, on February 12th, Elizabeth Warren was applauded by John H. Buhrmaster, Chairman of the Independent Community Bankers of America when she said, “We should be very skeptical of regulatory relief bills that are promoted as helping small banks but are pushed by ABA lobbyists for the big banks. If we really want to help the community banks … let’s start by holding big bank executives accountable for committing fraud like we do with small bank executives,”

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