Democracy in action

An online petition opposing HR 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, has supposedly attracted 43,833 supporters on a Web site that allows users to collect "signatures" on the Web.

According to the PetitionOnline.com home page, it's the hottest issue on the site today, beating out other petitions like "Save Our Santa Cruz Flea Market" (in fourth place with 6,904 signatures) and "Dancing With the Stars" (in sixth place with 4,960 signatures).

The flea market petition is a plea to the Santa Cruz County, Calif. board of supervisors to save a flea market that is apparently being displaced by a hospital (the situation isn't explained very clearly in the petition).

The Dancing With the Stars petition is equally puzzling to the uninitiated, concerning as it does "the events of the evening of October 30, 2007" on the highly-rated show, which allegedly "shocked and appalled a large majority of people." The petition asks that "the couple, Sabrina and Mark, return and the competition done over."

HR 3915 may also be mysterious to those who haven't been following it.

As detailed in an Oct. 25 Inman News story, the bill would create new minimum standards for all loans, while leaving the door open for states to create even stricter rules. Mortgage lenders say some of the bill's provisions -- including a ban on yield spread premiums and prohibitions on prepayment penalties on subprime loans -- will raise the cost of borrowing and make it tougher for people facing resets to refinance.

Mortgage brokers and mortgage bankers have different reasons for disliking the bill, however, with each group hoping to get a leg up on the other. 

Mortgage brokers, who shop for loans from different lenders on behalf of their clients, are up in arms about the proposed ban on yield-spread premiums -- fees they earn that are financed into a loan. Critics say yield spread premiums encourage mortgage brokers to place unwitting clients into higher cost loans.

Michael Calhoun, head of the Center for Responsible Lending, describes yield spread premiums as a "perverse incentive to place borrowers in higher-cost loans than they qualify for to maximize brokers' compensation."

Mortgage brokers say yield spread premiums make it feasible for them to serve communities that would otherwise be ignored by mortgage lenders, and that bank loan officers charge similar fees that should be subject to disclosure.

According to a story in American Banker today, the ongoing negotiations over the bill's language may result in an exemption for prime mortgages and fixed-rate subprime loans from the ban on yield-spread premiums.
 
Mortgage bankers, on their part, aren't thrilled with HR 3915 because it would allow states to continue adopting their own, even stricter standards. The Mortgage Bankers Association favors a single national standard that would preempt state laws.

Consumer groups like the Center for Responsible Lending have also criticized the bill, saying it would exempt Wall Street investors who buy securities backed by mortgage loans from class-action lawsuits, even if borrowers can show they were victimized by deceptive or predatory loan originators.

Thanks to Claudio Varga of My Home Loan in Irvine, Calif. for a heads up on the petition.

Regardless of what your position on the bill, I think it's great that this is attracting more attention than "Dancing With the Stars" on PetitionOnline.com. At the same time, I hope nobody is under the illusion that they are going to change the world by signing an online petition.

Read the Oct. 24 testimony on HR 3915 by industry groups, consumer advocates and regulators (here). Make up your own mind, and tell your elected representatives in Congress what you think.

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