The House and Senate have agreed on a financial regulation overhaul, which will impose some changes on the mortgage industry. Will it help consumers who get home loans? Lenders don't seem particularly happy about the compromise bill, and consumer advocates seem pleased.
I'm not so sure the financial regulation overhaul will help mortgage borrowers.
As I await details from the upcoming House-Senate conference report, these are my impressions of what we know so far:
It's simply wrong to call the Consumer Financial Protection Bureau "independent" when it resides inside the Federal Reserve. Proponents tout the independence of the bureau, whose chairman will be appointed by the president. But you're naïve if you believe the bureau's head won't be outmaneuvered bureaucratically by the chairman of the Fed and the president of the New York Fed.
Also, calling it a "bureau" is a savvy way of marginalizing it. People laugh when I tell them this, but I'm dead serious. "Bureau" is an old-timey word that conjures images of men wearing fedoras while listening to children playing the harpsichord in the parlor. Calling a new agency a bureau is like naming a newborn girl Buttercup. She ain't gonna be elected president with that name.
The bureau will write mortgage regulations, which the skilled bureaucratic warriors in the Fed will summarily gut.
From what I understand, the law will limit mortgage origination fees to 3 percent of the loan amount. This might make it unprofitable for lenders to underwrite smaller loans. I would guess that it'll be hard to borrow less than $80,000 under the 3 percent rule; the National Association of Mortgage Brokers says loans under $150,000 might become scarce.
Consumers could be affected by the law's treatment of compensation of loan originators. I need to get up to speed on the details. If I understand correctly, mortgage brokers won't be able to collect origination fees from borrowers if they also collect commissions from lenders for increasing the rate. On the surface, that sounds good. But it could take away flexibility.
I'll have more on that last issue later.