Factions Debate How to Simplify Mortgage Disclosure Regulations
Seiberg, Jaret, American Banker
Lawmakers, lenders, and consumer advocates agreed Wednesday that mortgage disclosures are confusing and ineffective but clashed over how to solve the problem.
"Regulation in this area has turned into a minefield," said Sen. Lauch Faircloth, R-N.C., and chairman of Senate Banking's financial institutions subcommittee. "The risk of lawsuits and criminal sanctions has discouraged competitors from bringing innovative products to market."
To provide time to reform the Real Estate Settlement Procedures and Truth- in-Lending acts, industry officials urged lawmakers to impose a nine month moratorium on mortgage disclosure lawsuits.
"We are here to ask Congress for a time-out from piecemeal legislation and from class-action lawsuits in the courts," said Mortgage Bankers Association of America president Ron J. McCord, who noted that lenders have been hit recently with a series of suits charging that yield spread premiums are illegal kickbacks under Respa.
But consumer advocates objected, charging that a moratorium would strip customers of their only redress against unscrupulous lenders.
"We strongly oppose congressional action on this issue," said Margot Saunders, managing attorney for the National Consumer Law Center. "There is no reason why the judicial system should not be allowed to move forward."
Lawmakers did not weigh in on the moratorium request, but seemed eager to simplify the disclosure laws. …