A new legislation from the HFS chairman sparks controversy
The New York Post found out that Housing Financial Services Chairman Barney Frank is set to unveil his new bill on March 30. It aims to overhaul the Obama rescue plan that was signed into law last month. The exclusive interview brought out new plans for the real estate industry. Among those cited are the following:
Loan originators will be paying for the first losses on subprime loans.
Improve the house appraisal system that will eliminate the Broker Price Opinions (BPO) and the Automated Value Model (AMV).
Increased scrutiny will be implemented on banks and mortgage brokers.
Additional protection for renters will be carried out to protect them from eviction in case their landlords fail to pay the mortgage.
This is an interesting move from Frank. First, the Congressman has been attacked heavily together with Chris Dodd for starting the mortgage mess. It seems though that we’re seeing it as his salvific move to redeem his reputation after making sure that Fannie Mae and Freddie Mac do not undergo stricter regulation in 2003. Second, he might have a harder time blocking the BPO and AMV use. Brokers and bankers will be lobbying to Congress to protect their profits and that could be more difficult to suppress. Third, he intends to eliminate brokers’ commissions for tricking buyers into taking higher risk loans. Since the details of his bill are yet to be announced, it will be difficult to prove that a broker has done such violation. Lastly the Post states, “Frank’s overhaul of the plan announced by Treasury Secretary Tim Geithner aims to shield the hedge funds and money managers who purchase the securitized mortgages in the future from the risky behavior of the banks.” And we wouldn’t be wondering why Citi and the others will be planning a protest too.