Related Document(s):
	MBA Testimony NY Senate May 12, 2008

In his testimony, Richman praised the bill’s goals to stabilize the housing market, help at risk borrowers avoid foreclosure and prevent some of the lending abuses that occurred from happening again.

“We believe the bill is a well intentioned attempt to minimize the rising number of foreclosures and to strengthen the laws governing lending practices in the state,” said Richman.  “MBA strongly supports the provisions that criminalize mortgage fraud, prevent foreclosure rescue scams, establish stronger standards for appraisers, and create a duty of care for mortgage brokers.”

However, Richman did express concern about several provisions of the bill created overly broad new legal requirements would restrict the availability of mortgage credit for many worthy borrowers in New York.  Specifically, the bill creates a new category of loans, known as “non-conventional loans.”  According to Richman, because of the additional legal liability involved in making these loans, lenders simply would not lend in that segment of the market, denying credit to all but those with the best credit profiles.

Additionally, the bill creates a new liability for predatory lending practices that is extended to include all parties in the loan securitization process, known as “assignee liability.”

“If enacted, the triggers proposed in this bill will create a real threat of acute capital shortage in New York,” continued Richman.  “They will, in all likelihood, eliminate massive volumes of lending in the mid-tier sector of the market and will certainly curtail access to much-needed credit for a large segment of borrowers in New York, particularly low- and moderate-income borrowers.”

Richman also raised doubts about the bill’s provisions establishing a “tangible net benefits” standard for refinancing, lenders being required to evaluate a borrower’s “ability to repay” and the elimination of Yield Spread Premiums and prepayment penalties on certain types of loans.  

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.