Proposed Legislation Makes "Mortgage Brokers Facing Extinction"!

"Mortgage brokers are facing extinction" reads the headline from the trade group for most residential mortgage brokers (I only write commercial real estate mortgages).

Given the perceived abuses in mortgage lending, and the reality of financial distress so many homeowners are under, the U.S. House of Representatives is considering a bill that will fundamentally change the way mortgage brokers are paid, and legislate underwriting guidelines.

One fear to mortgage brokers is that all subprime lending will cease to exist due to excessive lender liability.

My view, however, is that much of this is long overdue:

1. Changing 'back-end points' or yield-spread compensation will only bring us back to the old days where we had to disclose points on a deal. I don't have any problem with that, and frankly, it should have been done a long time ago.

2. A minimum licensing standard and higher barrier to entry for all originators is also long overdue. Too many rookies, untrained, inexperienced people have pushed mortgages and called themselves "experts." Set a standard and drain the swamp!

3. What's wrong with qualifying a borrower based on amortizing payments, taxes, insurance, or a net tangible benefit? All that makes perfect sense to me. To me, sound lending is not only if one can qualify, but why do they want this loan in the first place?

4. Increased lender liability will lead to increased broker liability which will lead to increased care and diligence in conducting business. All of that is a good thing.

Now, if you want to blow me out of the water then just send my message to all the brokers you know, but its a free country and I think everyone should be responsible for all their actions, including lending in either a broker or lender capacity.