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For
several years, NAMB has participated in a broad industry initiative to
effect comprehensive mortage reform.
There
are two acts in particular that affect the mortgage business:
- The Truth in Lending Act
(TILA)
- The Real Estate Settlement
Procedures Act (RESPA).
Over the
years, this initiative has gone through various stages, including the
negotiated rulemaking effort sponsored by HUD in 1996, the Mortgage Reform
Working Group (MRWG) of 1997-98, and various smaller negotiating groups and
coalitions that have continued to this day. NAMB has been an active
participant in each of these efforts.
The
principal objectives of reform have been to address five areas:
- Disclosure Requirements
- Civil Penalties and Remedies
- Consumer Protections Against
Abusive Lending Practices
- Referral Fee Restrictions
- Federal Preemption of State
Laws
These
five areas have formed the basis of most discussions about reform. Among
them, consumer protections against abusive practices came to be part of the
discussion at the insistence of consumer advocates.
In
general, the new consumer protections that have been discussed often took
the form of revisions and expansions to the Home Ownership and Equity
Protection Act (HOEPA), which is a part of the TILA. In recent years, such
efforts by consumer advocates have taken on their own impetus, somewhat
independent of comprehensive reform, and given rise to a great number of
bills at the state level, and occasionally at the federal level, known as
"predatory lending" bills.
For most
of the history of mortgage reform, the object has been comprehensive reform
to be achieved by an Act of Congress. Comprehensive reform would address
each of the foregoing five areas and significantly change both RESPA and
TILA. At various stages, congressional action has been more and less
likely, based on prevailing political factors at the time. Current industry
efforts are directed at achieving certain aspects of reform at the
regulatory level under RESPA only, working with HUD.
NAMB's principal, specific goals under mortgage
reform are:
- To eliminate the
distinction, inherent in current law, between mortgage brokers and
other retail originators
- To eliminate the current
requirement that mortgage brokers itemize their profit margin for each
transaction in the RESPA disclosures
- To blunt the current class
action threat that stems from plaintiffs' allegations that mortgage
broker compensation violates the anti-referral fee provisions of
RESPA.
NAMB's overarching goal, consistent with these three specific
ones, is to leave the federal regulatory system simpler and more
streamlined, to the benefit of consumers and industry alike.
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