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Mortgage Reform
NAMB's top legislative and regulatory priority in 2001 is
comprehensive mortgage reform. While this has gone through several
iterations since NAMB launched its initial effort in 1996, and we are not
anticipating legislation in 2001, NAMB remains committed to some
fundamental principles that need to be communicated to Congress.
Mortgage brokers support a comprehensive overhaul and
reform of the nation's mortgage lending statutes
Residential mortgage lending accounts for over a trillion dollars of
economic activity each year. Yet this industry, and the consumers it
serves, continue to suffer from an overly complex and outdated set of
statutes and regulations governing mortgage lending. Mortgage brokers
originate over half of all mortgages each year, and thus have the most
experience dealing with these cumbersome and confusing rules, excessive
paperwork, and disclosures that are not effectively informing consumers in
today's marketplace. These complex rules are especially burdensome to
mortgage brokers, the vast majority of which are small businesses.
Mortgage reform will help the nation's economy
As the Federal Reserve continues to reduce interest rates to help the
flagging economy, mortgage rates are falling as
well. Homeowners may be encouraged to refinance, putting more dollars into
circulation and thus helping to stimulate economic growth. However, the
cumbersome and costly nature of today's mortgage process may discourage
many homeowners from taking advantage of lower rates. If the process is
streamlined, consumers will be able to refinance more quickly and at lower
cost, and more of them will do so.
Mortgage reform should include consolidation of RESPA
and TILA and elimination of duplicative and vague provisions of both
The Real Estate Settlement Procedures Act (RESPA) and the Truth In Lending
Act (TILA) are the two major statutes governing mortgage lending today. Yet
neither was originally intended to regulate mortgage lending. As a result,
the conflicting disclosures and paperwork required under each of these laws
are overly complex and thoroughly confusing to borrowers. The disclosures
do not effectively allow consumers to shop or compare loan terms and rates.
And the vagueness of some provisions has led to a
proliferations of lawsuits that have cost the industry - and
consumers - millions of dollars. A new statute that is exclusively designed
for mortgage lending and is unified, clear, and concise will benefit
everyone.
Current regulations under RESPA are especially onerous
to mortgage brokers and must be changed
RESPA was enacted in 1974. It is difficult to describe how much the
financial world has changed since 1974, but mortgage lending has changed
little due to the restrictions of this statute. In particular, RESPA never
anticipated the dominance of the mortgage broker in the origination
process. As a result, the regulations under RESPA treat mortgage brokers
differently than most other sources of mortgages. Only mortgage brokers are
required to disclose their profit margin on every loan. The required RESPA
disclosures do not adequately inform consumers of the role of the mortgage
broker and how the broker is compensated. This is confusing to borrowers
and unfair to mortgage brokers. NAMB wants the Department of Housing and
Urban Development to review Regulation X, the regulation that implements
RESPA, and revise it to institute fair and accurate disclosures about the
role of mortgage brokers and their compensation.
Mortgage
brokers continue to support a new statute to replace RESPA and TILA, but in
the meantime we are seeking immediate regulatory reform and asking Congress
to support this reform
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