Following Simon Parker's visit to the Mortgage Bankers Association (MBA) conference in San Diego, we thought it timely to update Canadian mortgage professionals on some of the key acronyms in vogue south of the border
Acronyms can be a curse when you're trying to make sense of something. And what makes it tougher is when a spate of new acronyms (or old ones back in favour) burst forth into popular circulation. This is the case within the U.S. mortgage space of late following the recent push for more regulation of the mortgage sector.
MBA (Mortgage Bankers Association): An organization many Canadian mortgage professionals would already be familiar with, this body represents real estate finance professionals in the U.S.
HVCC (Home Valuation Code of Conduct): Introduced May 1 of this year, this code aims to ensure home appraisers are given the independence they need to provide accurate and unbiased property valuations. One of the key changes involves a lender's loan production staff. They are banned from being involved in the selection of appraisers, and the code limits the degree and basis of communication the two parties can have. Moreover, where the lender has its own appraisal team, this group is kept entirely separate to the loan production and sales departments within that organization.
RESPA (Real Estate Settlement Procedures Act): A consumer protection statute introduced in 1974, it has been updated with new rules due to come into effect Jan. 1, 2010. One such rule relates to changes to the 'Good Faith Estimate' (GFE) - see next point for more details.
GFE (Good Faith Estimate): This provides borrowers with an estimate of what their settlement charges and loan terms will be. A pdf copy of the Good Faith Estimate can be obtained at: Hud.gov/offices/hsg/ramh/res/gfestimate.pdf
GSE (Government-Sponsored Enterprise): This includes organizations such as Fannie Mae and Freddie Mac, both of which have been hit hard since the crisis started. This was highlighted in 2009 third quarter results - Fannie Mae recorded a net loss of US$18.9 billion, while Freddie Mac posted a $5 billion loss. These organizations were originally set up by Congress to help ensure the supply of money for home ownership.
MIRA (Mortgage Improvement and Regulation Act): This is how the MBA would like to see regulation of the mortgage industry handled in the U.S. The proposal, which has been forwarded to Congress, aims to remove the patchwork of state and federal rules relating to mortgage lending.
CFPA (Consumer Financial Protection Agency Act): This is the bill the MBA has some concerns about, hence its MIRA proposal. The MBA argues that the bill fails to empower the CFPA "to establish uniform national standards that will regulate all lenders and protect all borrowers consistently regardless of where they live." The final version of the bill was approved by the House Financial Services Committee on Oct. 22, with President Obama's support. "The Consumer Financial Protection Agency will prevent predatory lending practices and other abuses and will ensure consumers get clear information they can understand about financial products like credit cards and mortgages," he was reported as saying. The bill's next stop was the full House for a vote after which, if passed, it would proceed to the Senate.
HUD (Department of Housing and Urban Development): No, this isn't what a football quarterback says in order to receive the ball. It's the country's housing agency, a body dedicated to sustaining homeownership, creating affordable housing opportunities for low-income Americans,
OMG (Yes, Oh My Goodness): But this isn't to do with the plethora of acronyms that abound in the U.S. mortgage industry. It's the foreclosure numbers that have prompted this response. Take the number of workout plans, where borrowers have received assistance in order to avoid foreclosure, that have been implemented since July 2007 (as of Aug. 31 this year) - more than 5.2 million. That's bigger than the population of B.C. Recent changes to the Freddie Mac Relief Refinance Mortgage program (part of HARP), which includes an increase in the maximum allowable loan-to-value ratio up to 125 percent and the ability to refinance through any servicer, is likely to see many more people qualify for help, and illustrates the depth of the problems south of the border.