Loan Industry Fighting Rules on Mortgages

New York Times (04/28/08); Labaton, Stephen
The lending industry submitted more than 5,000 comments to the Federal Reserve on its proposed rules to tighten mortgage underwriting standards, causing the central bank to make the rules applicable to a smaller number of loans. The rules would require mortgage lenders to provide loans that are affordable to borrowers, disclose hidden fees typically added to interest payments and ban misleading advertisements, applying only to new mortgages whose interest rates exceed Treasury rates by three percentage points. Numerous industry groups, including the Mortgage Bankers Association and the National Association of Realtors, have criticized the rules, which are expected to be finalized this summer. According to MBA Chairman Kieran Quinn, CMB, "We support many of the provisions in the proposed rule, but we do have concerns about the increased regulatory burden, liability and reputational risks that lenders might face." Meanwhile, Federal Deposit Insurance Corp. Chair Sheila Bair wants the central bank to make the rules stricter by prohibiting hidden fees paid to mortgage brokers, getting rid of a safe harbor provision that safeguards lenders who neglect to check borrowers' income or assets in certain situations and allow borrowers to file lawsuits against lenders without providing evidence that lenders were involved in "a pattern of abusive practices."