Sub-Prime Mortgage Legislation and Regulatory

Environment in 2004

Presented by:James NedvedJune 17, 2004

Sub-Prime Historical Overview

• Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA)

• Home Ownership and Equity Protection Act of 1994 (HOEPA)

• Recent State Laws ExamplesNorth Carolina – 1999Georgia – 2002

• Office of Comptroller of the Currency – 2004

Macroeconomic Implications

• 11% of GDP is Real Estate Financing

• 2003 Total Mortgage Originations were $4.6 Trillion

• 2004 Estimates are $2.6 Trillion

• Sub-Prime lending increased 160% in total origination volume from 1994 to 1999 (and still increasing today)

Sub-Prime Predatory Lending Practices

• Section “32” Fee Structures of HOEPA

• North Carolina changes in 1999

Subsequent Origination Volume Implications – 43% Change **

• OCC preempting 2002 Georgia Law

• HUD – Treasury Joint Executive Summary

Predatory Lending Signals

• Property “Flipping”• Single Premium Credit Life Insurance• Lending without Income Verification• Fraud• Third Party Violations• Pre-Payment Penalties• Balloon Mortgage Amortization Schedules• Credit Reporting Misinformation• Mandatory Arbitration

Sub-Prime Mortgage Recommendations to Curb Predatory Lending Actions

• National Pre-Payment Penalty Limits

• Maximum Origination Points and Fee Structure

• Mandatory High School Mortgage and Budgeting Curriculum

Final Comments

• Evolution of Sub-Prime Lending since I started my career in the industry in 1995

• Personal Future Outlook

Questions or Comments