Large mortgage lenders are forming a coalition to lobby for favorable legislation apart from the Mortgage Bankers Association.
The Mortgage Capitol Group already has GE Capital Mortgage Corp. and PHH U.S. Mortgage Corp. as members, and says Bank of America, Chase and Chemical, Citicorp, Fleet, Home Savings of America, NationsBank, and others have expressed interest.
It has filed for a separate seat on the Department of Housing and Urban Development's panel on negotiated rulemaking. Under a bill in Congress expected to be passed soon, HUD will have to negotiate all the rules it drafts.
In its mission statement, the Mortgage Capitol Group mentions the emergence of national, rather than regional, lenders in the last decade that have different interests and emphases from most MBA members.
The group says the issues it will focus on in the next year are the streamlining of origination processes, cross-marketing, affinity relationships, wholesale lending, third-party loan sources, and litigation assaults on the mortgage industry.
Members and MBA representatives both say the formation of another outside organization does not necessarily mean a chasm between larger lenders and the MBA.
"We were hoping to work closely with the MBA on this," said Jeanne de Cervens, associate general counsel at PHH and a spokeswoman for the new group. "The problem with every organization is that members always have different interests," she added. "We have more sophisticated systems (then smaller lenders), and it's something that is a narrow issue that may not be closely shared with MBA."
Both GE Capital's CEO Greg Barmore, and PHH's CEO H. Robert Nagel are regarded as instrumental forces in creating the Mortgage Capital Group, which has its roots in the Rodash lawsuit, in which a borrower was allowed to rescind a mortgage because of fees not disclosed as finance charges.
Many of the large lenders forming the organization banded together to fight the risk that such retroactive applications might become widespread. Small lenders "didn't realize the threat they were under," a source said, adding that it was the larger lenders who were left to do the brunt of the legwork. President Clinton recently signed into law legislation prohibiting further lawsuits of that nature.
The addition of a second body during negotiated rulemaking processes should not weaken the MBA's lobbying strength, said Warren Lasko, president of the MBA. "It's not a unique development," he added, citing the creation of the Housing Roundtable as a similar splinter organization.
But outside observers have expressed doubts about whether the MBA and the Mortgage Capitol Group will be able to work together.
"MBA needs to define their identity," said Laurence E. Platt, a partner with Kirkpatrick & Lockhart, Washington, D.C. "Their challenge is to figure out whether they want to support the largest members, or their many smaller members. Right now they are trying to walk the tightrope."
Mr. Platt cites the MBA's recent policy change regarding payments to mortgage brokers as one example of the organization's attempt to satisfy both segments of its membership. He said the MBA had changed its initial opposition toward payments to employees of banks or securities firms who make referrals to mortgage companies - often owned by the bank itself. Instead, last month the MBA shifted its sights to payments to real estate brokers, he said.
"The biggest divisive issue (among MBA members) is Respa," Mr. Platt declared, referring to the Real Estate Settlement Procedures Act.
The final list of members for HUD's negotiated-rulemaking body will be available in about two months.
