May, 2002
Lobbying Sheet: Predatory Lending by Rob
Blumel Grassroots Manager
ATLA believes that predatory lending is a serious
problem that is being addressed in the regulatory arena at the
Federal level. ALTA is also concerned that Congress maintain the
current exclusion of title fees from the high cost loan test or
predatory lending loan test in any legislation dealing with
predatory lending.
The Home Owners Equity Protection Act (HOEPA) is the
current Federal Statute which deals with predatory loans. The HOEPA
amendments to the Truth in Lending Act (TILA) define a high cost
loan subject to the HOPEA requirements to include loans where "the
total points and fees payable by the consumer at or before closing
will exceed the greater of (i) 8 percent of the total loan amount;
or (ii) $400." (This $400 threshold is adjusted annually by the
Board based on the Consumer Price Index). In determining what
constitutes "points or fees" for purposes of this provision, the
current law provides that points and fees shall include "[f]ees or
premiums for title examination, title insurance, or similar
purposes."
However, such fees shall be excluded if:
- the charge is reasonable;
- the creditor receives no direct or indirect
compensation; and
- the charge is paid to a third party unaffiliated
with the creditor.
In other words, reasonable charges by independent
title entities who are not affiliated with the lender, and where the
lender does not receive direct or indirect compensation in
connection with the charge, are not counted toward the 8%/$400
"points and fees" threshold that can turn a mortgage loan into a
HOEPA-covered loan. On the other hand, if the provider of title
services is affiliated with the lender, or if the lender receives
direct or indirect compensation in connection with the charge, or
the provider’s charges are unreasonable, the amount of the
title-related charges is counted toward the 8%/$400 threshold.
The Federal Reserve Board has considered and rejected
recommending a statutory amendment that would replace the current
provision with an approach that would include all closing costs in
the "points and fees" trigger. ALTA believes that this current
approach of HOEPA is reasonable, that the Federal Reserve Board
action was appropriate, and that Congress should uphold the current
exclusion.
For further information contact Rob Blumel, ALTA
Grassroots Manager at 202-296-3671. |