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EquityLock Launches Referral Program to Distribute Home Price Protection

By James Comtois

SANDY, UT - While a home represents a crucial asset for most families, there's often no way to protect against devaluation. According to Moody's, housing markets may fall by as much as 20% to 40% in many areas of the country.

So, in the wake of the housing bubble of 2007, a local real estate investment risk mitigation firm has devised a way for homeowners to protect the asset value of their homes.

EquityLock Financial, in order to help real estate professionals increase their business while helping homebuyers protect their home equity in a market downturn, has launched a referral program for mortgage and other allied professionals to distribute its Home Price Protection contracts.

Compliance News Recap

Bowing to congressional pressure, the Department of Housing and Urban Development has extended the comment period on its Real Estate Settlement Procedures Act reform proposal for 30 days. But HUD acting Secretary Roy Bernardi says he is determined to finalize the RESPA rule before the end of this year. "In light of congressional and industry requests to extend the comment period for the rule, and our desire to develop the best possible rule, we are allowing additional time," Mr. Bernardi said. "However, we remain committed to finalizing the rule before the end of the administration." Nearly 150 members of Congress have signed a petition seeking an extension. Industry groups began clamoring for an extension as soon as the proposal was issued because it goes beyond revising the good-faith estimate to provide consumers with a clear and concise disclosure of loan terms and settlement costs. The HUD proposal is more ambitious and opens the door to volume discounts and other issues that have raised concerns among many settlement service providers. The comment period was due to expire May 13.

With Congress in crisis mode, the Mortgage Bankers Association is calling on lawmakers to take care of "unfinished business" by addressing policy issues that have, in some cases, lingered for years. Issuing a 10-point "Agenda to Stabilize the Housing Market," the MBA said at its National Secondary Market Conference in Boston that lawmakers need to step back from their "crisis mentality" and focus on basic policies to steady the mortgage market, help distressed borrowers, and ensure that today's problems don't recur. "We're saying to Congress to be very careful, and don't overreact," MBA senior vice president Steve O'Connor said at a press briefing. The MBA's 10-point plan includes some well-worn items, such as modernizing the Federal Housing Administration and reforming the regulatory structure governing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. But it also backs away from its previous stance that only mortgage brokers should be licensed. Now, the MBA says that with the exception of those who work directly for federally regulated institutions, all individual single-family loan originators should be licensed. "We support the licensing of all people, including direct lenders," said David Kittle, the MBA's chairman-elect. "We've come off that exception." The MBA can be found online at http://www.mortgagebankers.org.

The Federal Housing Administration "in the next few days" will announce a new proposal to introduce risk-based pricing, saying it is "unfair" to balance the long-term viability of the insurance fund on the backs of its lowest-income borrowers. "It's counterintuitive, but working-class families with FICO scores of 680 and above and which have saved for years for a downpayment have our lowest default rate," FHA Commissioner Brian Montgomery said at the Mortgage Bankers Association's National Secondary Market Conference in Boston. "We want to give those families a little price break." The FHA's first attempt at switching to risk-based pricing was pulled amidst a flurry of negative comments and opposition on Capitol Hill. But Mr. Montgomery said the new rule "will be more benign," including not as much of a discount to the least risky borrowers. "We're no longer going to 75 basis points," the FHA commissioner said. "There was concern from the private mortgage insurers that we were intruding into their realm. That was never our intent, but we will offer a little less of a discount." Mr. Montgomery said risk-based pricing has to be the "price of admission" if the FHA is forced to continue taking loans with seller-funded downpayments, which have a default rate three times the norm but are making up a larger and larger share of its portfolio.

A Federal Housing Administration bill approved by the House Financial Services Committee last week will fall far short of its goal of helping 1 million at-risk borrowers avoid foreclosure, according to budget analysts. The Congressional Budget Office estimates that the FHA refinancing bill (H.R. 5830) would refinance only 500,000 homeowners into FHA loans during the life of the four-year program, when 2.8 million borrowers are expected to face foreclosure proceedings. The budget analysts note that the bill requires holders of first liens to write down loans to about 85% of the current appraised value, and they would have "an incentive to direct their highest-risk loan into the program." Other liens must be extinguished, which leaves little incentive for second lienholders to participate, unless a foreclosure sale is imminent. About 40% of subprime and alternative-A mortgages have second liens. "CBO estimates about 25% of the loans with second liens could be refinanced under this new program," the agency said.

The Federal Housing Administration refinancing bill is on a fast-track in the House of Representatives but has hit a bump in the Senate Banking Committee, where a scheduled May 6 mark-up has been postponed. The House Financial Services Committee passed the FHA refinancing bill on May 1, and the full House is expected to vote on it during the week of May 5. The foreclosure prevention bill provides the Federal Housing Administration with $300 billion in loan commitment authority to refinance "underwater" mortgages. House leaders want to attach the FHA refinancing bill to a larger legislative package that includes FHA modernization and GSE reform bills the House passed last year. The bills increase the loan limits for the FHA, Fannie Mae, and Freddie Mac to $729,750. The package also includes a tax bill that provides revenue bonds to refinance subprime loans and a $7,500 tax credit for first-time homebuyers. Meanwhile, it appears that negotiations over a government-sponsored enterprise bill to strengthen regulation of Fannie and Freddie has bogged down, and Senate Banking Committee leaders will reschedule the May 6 mark-up. Committee Chairman Christopher J. Dodd, D-Conn., wants to tackle the GSE reform and FHA refinancing bills in the same mark-up.

Featured Grapevine Thread

Legal Corner

ARIZONA ENACTS CONSUMER CREDIT FREEZE LAW

FACTS

Effective Aug, 31, 2008 Arizona will allow consumers to "freeze" their credit reports and prevent consumer reporting agencies from releasing credit information to third parties without the express authorization of the consumer. Mortgage lenders and brokers are affected and are allowed to treat an application for credit as incomplete if unable to access a consumer's credit report due to a security freeze. (allregs42108)

MORAL

Tell the consumer if I cannot get to your credit, then neither any lender nor I can get you a loan. Or first ask the borrower if (s)he has put a credit freeze with any or all of the three bureaus so you are not surprised later.

CALIFORNIA LEGISLATION PROPOSES A DEED THAT WILL TRANSFER REAL PROPERTY ON DEATH OF THE OWNER

FACTS

AB 250 creates the revocable transfer on death deed, which transfers real property on the death of its owner without a probate proceeding. The bill requires a person have testamentary capacity to make or revoke the deed and requires the deed be in a statutory form provided for this purpose. The revocable TOD deed must be signed, dated, and acknowledged, as specified, and recorded, as specified, to be effective. The deed, during the owner's life, does not affect his or her ownership rights and, specifically, is part of the owner's estate for the purpose of Medi-Cal eligibility and reimbursement. The bill voids a revocable TOD deed if, at the time of the owner's death, the property is titled in joint tenancy or as community property with right of survivorship. The bill establishes priorities for creditor claims against the owner and the beneficiary of the deed in connection with the property transferred and limits on the liability of the beneficiary. The bill establishes a process for contesting the transfer of real property by a revocable TOD deed. (AB 250)

MORAL

The lawyers' right to work act. It provides exceptions for joint tenancy and community property deeds but what if the title is broken by one party secretly executing a quitclaim deed to convert their joint tenancy share or community property share to tenancy in common and then do the TOD? Interesting question when you think about it.

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