I’m from the Government and I’m here to help you! - Granite Grok

I’m from the Government and I’m here to help you!

Most of us have heard that very sad bad joke. Unfortunately, it is all too real in many aspects of our daily lives.

A perfect example of this came up recently, courtesy of former President Obama, US Senator Elizabeth Warren, former US Senator Chris Dodd, and former US Representative Barney Frank- paragons of virtue all.

By way of background, in 2010, after having been prodded by the Obama White House, Congress passed (with 3 Senate RINO’s voting for it to overcome a filibuster) and Obama ultimately signed into law the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” commonly known as Dodd-Frank. Supposedly in response to the financial crisis of 2007-2008, caused in large measure by the federal government’s own ill-advised policies, Dodd-Frank vastly reorganized the financial regulatory system, eliminating the Office of Thrift Supervision, assigning new responsibilities to existing agencies like the FDIC, and created new agencies like the unaccountable Consumer Financial Protection Bureau (CFPB), Senator Warren’s darling agency. The CFPB was charged with protecting consumers against abuses related to credit cards, mortgages, and other financial products.

On January 10, 2014, the CFPB’s Loan Originator Rule came into effect to implement the new Dodd-Frank requirements. Supposedly to protect us stupid citizens who did not know how to protect ourselves, you would not believe what this actually means in practice.

So, fast forward to a few weeks ago. A man wanted to assist his son and his wife in their purchase of a new home by providing them with a 100% mortgage loan on very favorable terms. Especially good since the “kids” could not qualify for a conventional mortgage. Sounds like a great thing to take place within a family unit, and should be easy to implement- no applications or appraisals required, no mortgage brokerage fees or points charged, etc. But illegal under Dodd-Frank we soon learn.

Under Dodd-Frank and the CFPB’s Loan Originator Rule, any mortgage loan made on the security of a 1 to 4 unit residence must be “arranged” by a licensed mortgage broker, except for a small limited number of exceptions. Even if the mortgage loan is between family members who have no need for the “services” of a mortgage broker.

If you make such a mortgage loan without the “services” of a licensed mortgage broker, you can be subjected to various and sundry outrageous government impositions, such as a private right to sue for violations and attorneys’ fees and costs, penalties of up to $4,000 to $5,000 per day at a minimum, $25,000 for reckless violations, and $1,000,000 per day for knowing violations. There could also be other actions against the violator such as rescission or reformation of contract, refund of borrower costs, return of interest paid, return of real property, restitution, disgorgement or compensation for unjust enrichment, private damages, other monetary relief, and other relief currently undefined.

So, as the closing with the seller of the home rapidly approached, and not wanting to subject the generous father to exposure to potentially enormous penalties for helping his son, what to do without blowing the deal?

Easy- go online and find some licensed mortgage brokers in the area of the new home and see if any of them will serve as the “originator” of the new mortgage loan by the father- for a fee, of course!

That is exactly what happened within the past few weeks. A small licensed mortgage broker in the area of the new home who was willing to accommodate the transaction (and who personally thought the rule requirements were absurd) was found and the purchase and new mortgage loan closings were held. And the friendly licensed mortgage broker was paid $2,795 for his unneeded & unwanted “services.” But he charged less than his usual $4,000 minimum. Naturally, this extra cost was rolled into the cost of the home and the new mortgage that will ultimately have to be paid.

Thus, in an era marked by rampant financial frauds enabled and/or encouraged by the federal and state governments (see the sub-prime mortgage market collapse; the Madoff scandal; and the FRM mortgage fraud in our own beloved New Hampshire, among many others), with the various government agencies, federal and state, that were there supposedly to “help” us doing nothing or worse than nothing, we now have this unwanted and unnecessary intrusion of the federal government, and its un-elected bureaucrats, into mortgage loans between family members.

But I am sure if you ask Senator Warren whether the CFPB and its silly rules are a good idea, she will almost certainly agree.

This unwarranted expansion of the government into yet another nook and cranny of our lives is a perfect example of, as General Stark observed, an evil worse than death.

I am not making any of this up.

>