Homeowner's Blog

New Rules Will Improve Mortgage Finance Disclosures

The new federal government home mortgage finance rules requiring better disclosures to consumers beginning 1/1/2010 are a step forward, but more improvement is needed. They were watered down over the many years it has taken to develop the current rules. At the end of the day HUD officials in both the Bush and Obama Administration deserve the thanks of consumers for stiffening their resolve in the face of intense lobbying pressure from mortgage brokers, lenders, title insurers, and real estate brokers to abandon the process. They were able to get nearly half of Congress to sponsor legislation that would have prevented the new rules from being implemented. Lead sponsors of that legislation, Reps. Judy Biggert, R-Ill., and Ruben Hinojosa, D-Texas, failed recently in their last ditch attempt to delay the implementation of the new RESPA rules. Last October they sought unsuccessfully to amend the bill that would create a Consumer Financial Protection Agency.

I learned of one of the remaining problem areas when I went to settlement on the refinancing of the mortgage on our home this past Wednesday. Our new monthly mortgage payments turned out to be about $200 per month more than the estimated amount in our Good Faith Estimate. The difference was that the estimated property tax and hazard insurance figures in our GFE were $200 less than the actual amount we have been paying. We provided our current real estate taxes and property insurance numbers to our mortgage broker before he gave us the GFE. We assumed he would use those numbers in his estimate and therefor didn't bother to check them. As a result the low GFE monthly payment estimate he gave us made us smile, and certainly reinforced our decision to go forward with the refi.

One thing the new rules do not address is problems like this. Curious as to whether there is a tendency for mortgage brokers to low ball taxes and insurance to make their GFE new mortgage payment numbers look better than they actually will be, I asked the settlement service executive what share of the refis that come to her with GFEs in which the mortgage brokers used very low and obviously incorrect real estate tax and insurance amounts rather than the homeowners current actual payments. "Most of them", she told me. This and a number of other RESPA problems need to be addressed, but at least we're making a start.

Why Congress Should Allow Drug Re-importation

A pending amendment to the Senate healthcare bill would allow drug re-importation from other countries, saving consumers and the government an enormous amount of money. The pharmaceutical industry has argued that drug re-importation would gut their profits and medical research investments, but we disagree. True, they would have less money available for marketing, big bonuses, and lobbying expenses. Cutting those costs wouldn't hurt consumers or the pharmaceutical industry.

If the pharmaceutical industry also cut back on medical research as a result of the re-importation proposal, that can easily be addressed as well. We could offset any decline in corporate primary medical research resulting from the re-importation proposal by reinvesting a small part of the considerable resulting government savings in expanded government sponsored medical research. Taxpayers could recover much of those additional costs as well, simply by requiring pharmaceutical companies to start reimbursing the government for the share of publicly owned intellectual property reflected in the cost of the proprietary drugs enabled by that research. We should have done that a long time ago anyway.

Pharmaceutical companies have argued that other governments who place caps on the amount they will pay for prescription drugs are also acting foolishly, because it is undercutting their profits and medical research investments. We disagree with that as well . Those governments are only practicing the golden rule (he with the gold rules). Foreign governments can't force pharmaceutical industry to sell them their products, so it is obviously still profitable for the pharmaceutical companies to do so.

A New Stimulus Program

President Obama outlined new incentives to ease the unemployment and strengthen the economy on December 8. Among the components are a "cash for caulkers" proposal that would provide tax incentives for home weatherization. With only the slightest progress towards economic and job recovery so far, it was important to the national psyche that the President reaffirm the commitment to whatever steps are necessary to avoid risks of further economic erosion, and to create confidence that more will be done to start reducing unemployment. It was also important to the national psyche that the President reaffirm that some of the repaid TARP funds will be allocated to budget deficit reduction, an objective that is critical to our long term economic health.

Congress won't start seriously looking at the President's recommendations until early next year. That's also appropriate, because we'll then have a better idea of how the funds from the previous stimulus package that are only now beginning to impact the marketplace are working, and Congress will be better able to gauge how to balance deficit reduction goals with the need for more stimulus as it exists at that time. Best news of all would be that the current stimulus program is beginning to significantly reduce unemployment by then, and much more of the money could be used for deficit reduction.  All in all, there was only upside in the President's announcement.