The Cause and Effect of CFPB Proposed Changes

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by Jason Madiedo

The Consumer Finance Protection Bureau (CFPB) recently proposed further clarification on rules that govern the mortgage industry, including borrower loan cost options, loan officer compensation and other changes that will impact how lenders legally deal with borrowers and the cost to deliver a home mortgage.

The new proposed “ZERO-ZERO” Option requirement is designed to provide consumers with a no-cost, simpler way of shopping for a mortgage. On the plus side, borrowers can focus on the interest rate and the level of service they are receiving, which is ultimately a good thing. On the down side, however, all-inclusive mortgages will increase interest rates and borrowers will pay for those additional fees over a 30-year term versus a one-time charge. How will consumers benefit from this? Do the math; they won’t.

As for loan officer compensation, the proposed rule change clarifies the terms of compensation between the loan officer and a company. This is a good thing. There are other areas of compensation that remain unclear due to the many nuances of a commission-based industry. The new proposed changes help shrink the broadly interpreted areas between companies as it relates to compensation. One area companies have struggled with is the cost to cure issues. Previously a company had the ability to adjust a Loan Officers commission upon mutual agreement to curtail any unforeseen cost in favor of the borrower due to unforeseen changes that arise during transactions that ability was removed under the current rule. Under the proposed changes, this option would become available again, and effectively, allowing for more flexibility to help borrowers with unforeseen costs.

Other proposed options include new compensation structures and other forms of benefits like retirement accounts, stock options and performance bonuses. These are more long-term benefits although good it will not allow companies to reward its best performers on a more active basis such as quarterly or annually. While the proposal refers to other qualified plans that remain unnamed, the industry will watch this matter closely because it is integral to how lenders pay loan officers and how companies recruit and retain the best talent.

The final area of the CFPB’s proposal that may become a big issue for mortgage companies is the arbitration clauses. Arbitration is a commonly used method to keep costs down for all parties in a contract, should a disagreement arise. Arbitration is a mutually beneficial alternative to litigation. The CFPB’s proposal completely removes that option and will thereby increase the legal risk to lenders and inherently increase cost to consumers.

Commonsense reforms that make our business better and actually benefit consumers are key. But change just for the sake of change, threatens to create unintended consequences that will increase the cost of homeownership and do little to improve the mortgage process. Like many lending leaders, I will watch this conversation closely and cross my fingers that commonsense prevails.

Jason Madiedo

About the author:
Jason Madiedo is the President/CEO of Venta Financial Group, Inc., dba, Alterra Home Loans and Venta Wholesale, a 100% Minority owned mortgage banking firm specializing in diverse markets and currently serves California, Nevada, Arizona, Texas and Florida with retail and wholesale locations.

Hispanics Continue to Account for Majority of New Homeowners

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by Alejandro Becerra

Between June 2011 and June 2012, Latinos accounted for a net increase of 453,000 owner households in the country, helping the housing sector add to economic growth. According to the Census Bureau, the number of Hispanic owner households grew from 6,206,000 at the end of the second quarter a year ago to 6,659,000 at the end of the second quarter 2012, a substantial increase of 7.3 percent.

Of 855,000 new owner households added between June 2011 and June 2012, 53 percent (453,000) were Hispanic owner households. The remaining 402,000 new owner households (47 percent) consisted of Asian owner households and other minority races.

For the entire country, however, there was a net increase of only 125,000 owner households due to a large decline of 649,000 White owner households and a decrease of 81,000 Black owner households. The net increase in Hispanic owner households helped Hispanics maintain nearly the same rate of homeownership from a year ago, which now stands at 46.5 percent.

These Hispanic homeownership gains have been overshadowed by young Hispanics forming households at such a rapid rate that they will necessarily form a greater number of renter households before they are ready to buy a home. Although Hispanics accounted for 453,000 additional owner households during the last 12 months, they also accounted for an additional 554,000 rental units. In effect, the gain in total Hispanic household growth over the past year was greater than 1 million.

Overall, job and home losses, rapid population growth, and tighter credit conditions have dented the formidable homeownership gains that Hispanics had made through the mid- 2000’s. Nonetheless, in spite of the adverse effects of the housing crisis, Hispanics continue to exhibit strong aspirations for buying a home and achieving sustainable homeownership.

Latino homeownership gains have been attained consistently for the past 12 years. Latino homeownership grew 63 percent to 6.7 million owner households at the end of June from 4.1 million owner households in June 2000. In contrast, homeownership for Whites grew only 2.3 percent to 57.8 million in June from 56.5 million owner households in June 2000.

According to Gerardo Ascencio, president of the National Association of Hispanic Real Estate Professionals, “Latinos are now an increasingly key market for homeownership and a major driving force in the economy. Their relatively young age, exponential population growth and increased incomes are likely leading to a greater number of Hispanic homebuyers.” Latinos also play a critical role as a major component of the labor force, especially in the construction sector. The number of Hispanics with jobs continued to increase by 81,000 in July, to a historical high of 22.0 million.

Jim Parrott, Senior Advisor for the White House National Economic Council, also attributes Latinos’ persistent homeownership gains to the important role that the federal government is playing in providing mortgage loans to Latinos. Currently, the Federal Housing Administration, the US Department of Agriculture, and the Veterans Administration account for four out of every five loans made to Latinos.

The persistent growth of Hispanic homeownership even in the midst of a lagging economy underscores a basic reality: First-time minority homebuyers, led by the burgeoning population growth and purchasing power of Hispanics and Asians, are the key to America’s housing and economic recovery. The robust homeownership aspirations of Hispanics have resulted in homeownership gains that continue to make up for the heavy losses in homeownership they have suffered. It will, nevertheless, take a while before these gains lead to a higher rate of Hispanic homeownership.

While economic uncertainty prevails, a young and burgeoning Hispanic population will at first be forced to form renter households. Once the economy recovers, however, and an ample supply of safe, reasonable and affordable mortgage credit is made available, Latino households will be planting roots firmly in homeownership

Alejandro Becerra

About the author:
Author Alejandro Becerra is a recognized housing expert. He started his career working for the U.S. Department of Housing and Urban Development (HUD) within the International Housing and Mortgage Servicing Divisions, then in later years worked for HUD’s Office of Fair Housing and Equal Opportunity, and most recently from 2000 to 2003 with the HUD Field Office in Tucson, Arizona. He has also held key positions in the federal government, including that of Policy Analyst within the Office of the Secretary in USDA where he helped preserve the federal government’s only rural homeownership program for low- and moderate-income families. In 2011, he was the recipient of the National HOPE Policy Award for promoting sustainable minority homeownership.

To buy a copy of his book Hispanic Homeownership: The Key to America’s Housing and Economic Renewal go to

Protecting Women from Unlawful Mortgage Lending Practices

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Written by: John Trasviña
Cross posted from

Assistant Secretary John Trasvina receives the Superhero Award from MomsRising

Assistant Secretary John Trasviña receives the Superhero Award from MomsRising

Bringing a new child into a family and buying a house are two momentous and happy occasions for any family. When HUD’s Office of Fair Housing & Equal Opportunity (FHEO) learned that some mortgage lenders had policies or practices that make qualifying for a mortgage more difficult for pregnant women or parents on parental leave, we leapt into action. We knew that treating pregnant women and parents differently when issuing a mortgage could be a violation of the federal Fair Housing Act, which prohibits discrimination on the basis of gender or family status, amongst other categories.

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Defending Access To Homeownership

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by Carmen Mercado

June is National Homeownership Month, a time reserved for honoring the symbol of stability for working families. This year, however, celebrations have been traded for defensive strategies as housing industry partners mobilize to defend broad access to homeownership now threatened by regulator rulemaking.

The proposed QRM risk retention rule now up for debate would require prospective borrowers to present a 20 percent down payment, spend less than 28 percent of their monthly gross income on housing and have total household debt capped at 26 percent.

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I Hope My Ship Comes In Before My Pier Collapses

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by John Beneventi

Let’s face it, at times we all have engaged in deficit spending, especially in the real estate business where times can be lean between closings. While some deficits are good, deficits by nature are risky and can take away future wealth building opportunities. To properly manage your business and personal finances, like anything else, you need to pay attention to the details and update your expectations frequently. Here are some things that you should consider when contemplating the affect of the real estate downturn on your business:

  1. Income Trend: Start by clearly defining your last two years gross income. Has it gone down? If so, it is likely that you will continue to experience continued decline even if it is slight. When working on your financial predictions (i.e. annual budget) plan on the worst case income scenario. Read the rest of this entry »

HUD Budget Cuts Will Welcome Predators Back To Communities of Color

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by Yamila Ayad

Somebody pinch me please, because I feel like I’m having a bad dream.

In the shadow of the nation’s worst housing crisis, is it really possible that our nation’s lawmakers stripped away $88 million in funding for the HUD housing counseling services now available to the public?

Budget cuts are one thing — and necessary indeed to get the country back on track — but isn’t this cutting off our nose to spite our face? Seriously. Whatever figures you use — the latest research shows that the foreclosure crisis is far from over. An estimated 2.5 million foreclosures have occurred, with another 5.7 million forecasted to happen before its over.

In my local community of San Diego, entire neighborhoods have been decimated by the foreclosure crisis. Back in 2007, I founded a mobile foreclosure prevention counseling community service (Home Owners Mobile Education Clinic) because I couldn’t serve the volume of distressed homeowners coming to my office in need of counseling.

To date, the HOME Clinic has served about 9,000 families and has delivered help to distressed homeowners thanks to the help of local HUD counselors. I shudder to think about where these families would have turned had these services not been available. Read the rest of this entry »

The Role Of The Washington Post In The Nation’s Housing Crisis

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by Alejandro Becerra

A few weeks ago the Financial Crisis Inquiry Commission (FCIC) released a major report which identified the major causes of one of the worst economic crises in the nation’s history: More than 26 million Americans are out of work, four million families have lost their homes, and nearly $11 trillion in household wealth has been lost.

What did the Washington Post do about reporting this important story? The Post buried it on page A14, while prominently displaying on its front page a story about the Senate Tea Party Caucus meeting for the first time. Worse, the Post’s reporters undercut the report’s significance by suggesting that the report did not contain “any major revelation that would fundamentally alter popular perceptions of the crisis.”

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Please Exercise Your Right To Vote

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by Alex Chaparro

The midterm elections have brought into focus some interesting issues for the Hispanic community this year. Anti-immigrant sentiments have been part of the campaign rhetoric in states across the country as candidates hurl accusations and negative Hispanic images at one another. Arizona’s SB1070 law has sanctioned anti-Latino attitudes. The slurs and innuendo are downright offensive, insulting and impossible to ignore.

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The Key To Recovery: Getting Homeowners Back Into Our Neighborhoods

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by Alex Chaparro

Within days of major lenders putting foreclosures on hold, I began to hear from NAHREP members about the problems the embargo was causing new buyers in the hardest hit markets. Like you, I was relieved to hear the news that the White House opposes a national foreclosure moratorium and applaud the Administration for not overreacting to the recent document/recordkeeping issues. The unintended consequences of a broader moratorium would certainly deal a blow to an already fragile housing market.

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The Key to a Balanced National Housing Policy

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by Alejandro Becerra

An effective new national housing policy requires balancing affordable quality rental housing and sustainable homeownership goals. Public perception of an existing imbalance results from misunderstanding the effectiveness of our current policy. Advocates of rental housing incorrectly compare the total government funding available to support homeownership for all households with the tax incentives and subsidies available only for low- and moderate-income renter households.

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