American Land Title Association Applauds U.S. Representatives for Introducing Bill Protecting Consumers from Harmful Private Transfer Fees

ALTA NEWS

Contact: Jeremy Yohe                                

Office: 202-261-2938              

Phone: 202-590-8361
E-mail: jyohe@alta.org

** Immediate Release **                                                          

American Land Title Association Applauds U.S. Representatives for Introducing Bill Protecting Consumers from Harmful Private Transfer Fees


Washington, D.C., Sept. 29, 2010
— The American Land Title Association applauds U.S. Rep. Maxine Walters and co-sponsors Gwen Moore, Brad Sherman and Albio Sires for introducing a bill that protects consumers from a harmful real estate scheme that strips homeowners of equity in their house and depresses home prices.

Known as the Homeowner Equity Protection Act, HR 6260 would amend the Real Estate Settlement Procedures Act (RESPA) to prohibit the collection of private transfer fees by for-profit third parties on all federally related mortgage loans. When a private transfer fee is placed on a property, it requires that every time the property is sold for the next 99 years, 1 percent of the sale price of the property must be paid to an independent third party.

“We congratulate Rep. Walters and the co-sponsors for introducing this much-needed, consumer-protection bill,” said Kurt Pfotenhauer, chief executive officer of ALTA. “While traditional covenants have an accepted and beneficial role in the housing market by benefitting the land, these predatory instruments steal equity from American homeowners forcing them to pay a premium for the right to sell their own property.”

The use of private transfer fees has already been restricted in 18 states, while the Federal Housing Authority has already confirmed that the government won’t insure mortgages backed by homes with private transfer fee covenants attached. The Federal Housing Finance Administration has issued a guidance that would restrict Fannie Mae, Freddie Mac, and the Federal Home Loan Banks from investing in mortgages with these fees.

“Since RESPA is a consumer protection statute, this amendment makes perfect sense to ban these fees because they add no benefit or value to a property, and are little more than a predatory scheme meant to take advantage of unsuspecting homeowners,” Pfotenhauer said. “ALTA thanks the representatives for recognizing the danger that these fees pose to homeowners and the real estate market.”

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About ALTA

The American Land Title Association, founded in 1907, is a national trade association representing title insurance companies, title agents, independent abstracters, title searchers, and attorneys. With offices throughout the United States, ALTA members conduct title searches, examinations, closings, and issue title insurance that protects real property owners and mortgage lenders against losses from defects in titles.

Jeremy Yohe | Director of Communications | American Land Title Association | 1828 L St N.W., #705 | Washington, DC. 20036| Ph: (202) 261-2938 | Fax: (202) 223-5843 / (888) FAX-ALTA (239-2582)

  Visit ALTA online at www.alta.org for news and resources for the Title Industry.

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Report: Don’t give up on ‘nonprime’ lending | Inman News

Harvard researchers make a case for government’s continued role

Inman News

With so many people now saddled with poor credit, reestablishing “nonprime” lending is increasingly important to the future of homeownership, researchers at Harvard University’s Joint Center for Housing Studies argue in a new report.

The 212-page report, “Understanding the Boom and Bust in Nonprime Mortgage Lending,” analyzes how the practice of pooling nonprime mortgages into securities that were sold to investors helped fuel the housing bubble and resulting financial crash and recession.

Although much of that territory has been explored before, the report also looks ahead, drawing lessons from the past to put forward ideas for “sustainable” nonprime lending, and advocating a continuing role for government in guaranteeing mortgage debt.

Nonprime lending — subprime, alt-A and higher-priced lending — grew at a rapid pace during the housing boom, collapsing when the secondary market for those loans froze in August 2007.

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“sustainable non-prime lending” isn’t that like jumbo shrimp or wireless cable?

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Senate Banking Committee holds hearing on FHA’s current condition and future challenges

Today, the Senate Banking, Housing and Urban Affairs Committee held a hearing entitled “The Federal Housing Administration—Current Condition and Future Challenges” to assess the adequacy of the capital reserve fund of the Federal Housing Administration (FHA) following its decline below the statutorily-imposed limit, and to discuss proposals for reform within the FHA.    

Testifying before the Committee were the following witnesses:

Panel 1

  • David H. Stevens, FHA Commissioner and Assistant Secretary for Housing, U.S. Department of Housing and Urban Development
  • Matthew Scire, Director, Financial Markets and Community Investment, Government Accountability Office (GAO)

Chairman Christopher J. Dodd (D-CT) opening the hearing by discussing the widespread presence of the FHA in the housing and home financing markets, noting that assistance by the FHA loans accounted for half of all recent home purchases and half of refinancing activity. “The federal government now stands behind 90% of all mortgages in the country,” he stated.

The FHA currently is required to maintain secondary reserves of at least 2% of the total amount of the outstanding U.S. home mortgages it insures. The capital reserve fund is a secondary, surplus fund created by Congress in 1990 to provide an additional capital cushion for the FHA in times of economic turmoil. Mr. Stevens began his testimony by discussing this reserve requirement and noting last year’s decline in FHA’s capital reserve ratio below the statutory threshold. He also noted that although net budgetary actual performance is in line with the President’s budget presented in February, “our actual performance to date has been significantly better than predicted by the actuary.” He attributed this better-than-expected performance to the policy changes adopted by the FHA during 2010. He explained that the increased presence of the FHA in the housing and home financing market noted by Chairman Dodd came at a price—namely the capital reserve fund shortfall. Mr. Stevens reiterated the two- to three-year estimate made last year of when the required 2% capital reserve ratio would be reached. “2007 and 2008 were terrible books that were originated with limited scrutiny,” he noted, warning “we are absolutely not out of the woods.” He also warned against adopting a rigid timeline for compliance with the statutory reserve requirement. “I believe a timeline would be the wrong way of approaching the FHA reform. To be clear, we shall do everything he can to get it back to 2%. Those steps are in process,” Mr. Stevens said.

Mr. Stevens also stated that certain proposals adopted by FHA, including increased down payment requirements for borrowers with lower credit scores and tightening the minimum credit score for borrowers with lower down payments, had resulted in the average credit score for FHA-insured mortgages rising from 634 in 2007 to nearly 700 today. He also voiced support for a Senate bill designed to strengthen FHA’s tools to manage risk and protect the FHA capital reserve fund. The bill would allow third-party FHA loan originators to close those loans in their name and would allow the FHA to hold them accountable for any detected misrepresentation or fraud. “FHA remains committed to working with Congress to enact the full breadth of reforms” proposed by the bill, Mr. Stevens said.

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