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Welcome From Bob Jett, General Counsel for eDocs-Express.
Welcome to the Tenth Issue of the eDocs-Express Dispatch!
Interagency Guidance on Nontraditional Mortgage Product Risks -
The Warning the Feds Failed to Give. The banking regulatory agencies recently (October 10, 2006) issued an Interagency Guidance on Nontraditional Mortgage Product Risks. You can read this Memorandum for Chief Executive Officers by
clicking here.
Not surprisingly, the authors of this work, who are advising you how to run your business, apparently forgot the definition of the word "memorandum" - a term usually referring to a short note or informal message. This latest "Memorandum" consists of some 70 pages, including attachments.
The Memorandum for Chief Executive Officers on Nontraditional Mortgage Products ("NMP's" - yes that does sound like, and in some ways ironically may be similar to, a WMD) has four primary sections: (1) Portfolio and Risk Management Practices, (2) Loan Terms and Underwriting Standards, (3) Risk Layering, and (4) Consumer Protection.
In general, the guidance applies to all residential mortgage loan products that allow borrowers to defer repayment of principal or interest. This includes all interest-only products and negative amortization mortgages, with the exception of HELOC's.
Oh goody was my first reaction! More work for lawyers, more rules for lenders and even more cool disclosures for consumers.
My second reaction was to question why any sane mortgage lender would offer NMP's in the first place (or even worse portfolio them). Clearly there should have been a 5th section to the Memorandum for the forgetful and anyone born after 1960, namely a history lesson of the mortgage industry in the 70's and 80's.
Before you read the Memorandum, and certainly before you engage in offering NMP's, I suggest that you carefully study historical mortgage interest rates. Here's a web site where you can view 30-year fixed rated mortgage rates from 1971 to 2006.
Now here's the rest of the story - the Feds should have added to their Memorandum a Disclosue to Lenders. We have ruined the economy before through mismanagement of interest rates and we are fully capable of doing it again. If you have to offer NMP's, be prepared!
So enjoy the Dispatch and if there are any subjects you'd like us to cover, simply recommend a subject for a future issue of the Dispatch.
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News and Solutions from eDocs-Express
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Understanding the Asset Based Loan Agreement. In the Summer 2005 issue of the Dispatch we discussed the various loan agreements found in Laser Pro. In the current issue of the Dispatch, Bob Jett discusses the Asset Based Loan Agreement and multiple credit facilities.
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Learn more about this subject by reading Bob Jett's article on
Understanding the Asset Based Loan Agreement.
Our Web Site of the Month - Hedge Funds. Have any of your customers or associates asked you for advice or information about hedge funds. How much do you know about hedge funds?
Hedge funds are a type of private and unregistered investment pool. They are similar to mutual funds in that they both are pooled investment vehicles that accept investors’ money and generally invest it on a collective basis. They differ from mutual funds in that they are not registered under the federal securities laws because they accept only financially sophisticated investors and do not publicly offer their securities.
Read a Staff Report from the Securities and Exchange Commission that provides a thorough definition of hedge funds, the background of their development, the different forms of hedge funds available, who manages them, and how they're regulated.
Also read the July 25, 2006 testimony on hedge fund regulation of Randal K. Quarles, Under Secretary for Domestic Finance before the Senate Committee on Banking, Housing and Urban Affairs.
Here are a couple of hedge fund sites where you probably can learn more than you want to know about hedge funds:
"The Hedge Fund Center" and "Lipper HedgeWorld".
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News from the Lending World
US Department of the Treasury Office of Financial Education
The US Department of the Treasury established the Office of Financial Education in May of 2002. The Office promotes access to financial education tools to help consumers make wiser choices in areas of personal
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financial management, with a special emphasis on saving, credit management, home ownership and retirement planning.
The Office also coordinates the efforts of the Financial Literacy and Education Commission, a group chaired by the Secretary of Treasury and composed of representatives from 20 federal departments, agencies and commissions, which works to improve financial literacy and education for people throughout the United States.
We've just signed up to receive Financial Education Newsletters via Email. Hopefully we'll see that the expenditure of our tax dollars is helping to educate your customers. You too can sign up at their web site.
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Did You Miss the First Eight Issues of the Dispatch? If you did, you can visit the eDocs-Express Lending Center on our site to view past issues.
eDocs-Express Lending Center
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eDocs-Express LLC
756 Officers Row
Vancouver, WA 98661
(888) 493-9428 ext 12
www.edocs-express.com ¤ sales@edocs-express.com
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