WASHINGTON-President Obama's proposal to create a new agency to regulate mortgage lending and protect consumers from financial abuse is already drawing fire from the bankers.
But the mortgage brokers have decided to hang back and keep their powder dry except on certain issues. (Also see related story.)
It's not like the National Association of Mortgage Brokers believes a Consumer Financial Protection Agency should decide which mortgages are safe for consumers and which "plain vanilla" loans lenders must offer their customers.
"If it looks like it is taking a choice away from consumers, we would philosophically be opposed to that," said NAMB executive vice president Roy DeLoach.
But the brokers appear to see a silver lining in the Obama administration's proposal that could create parity between brokers and lenders when it comes to indirect compensation, such yield-spread premiums and servicing-release premiums.
"The NAMB applauds provisions calling for all originators to disclose all direct and indirect income," NAMB president Marc Savitt said. "We thank the Obama administration for recognizing the need to force lenders and banks to disclose to consumers their hidden fees. This will help consumers compare loan products between banks, lenders and mortgage brokers."
The administration proposal would ban YSPs and overages that are used as incentives to steer borrowers into higher cost loans.
But it appears YSPs that are factored into the mortgage interest would be permissible, provided they are disclosed up front to consumers.
"We want to keep our powder dry until we see how this plays out," Mr. DeLoach said.
House Financial Services Committee chairman Barney Frank, D-Mass., held a hearing on the administration's consumer protection agency on June 24. And the chairman signaled that he wants the committee to move quickly and pass a CFPA bill by the end of July.
Lobbyists say the chairman is looking at a July 23 markup date for the committee to debate and consider amendments to the administration's proposal.
Senate Banking Committee chairman Christopher Dodd, D-Conn., has embraced the concept of creating an independent consumer protection agency that would have broad regulatory and enforcement powers over all mortgage lenders and brokers.
However, Sen. Dodd is not planning to begin work on the Obama administration's regulatory reform proposals until this fall.
Meanwhile, the American Bankers Association is taking issue with the administration over the very concept of moving the consumer protection function out of the bank regulatory agencies.
"Simply put, it is a mistake to separate regulation of an institution from the regulation of its products," ABA president and chief executive Edward Yingling told Rep. Frank at the hearing.
It adds a new layer of regulation and costs, Mr. Yingling testified, "not to mention the inherent conflicts that will occur between the prudential regulator and the consumer regulator."
The ABA president also expressed concern about the CFPA's mandate to create plain vanilla products and services. "The agency is basically urged to give the products and services it designs regulatory preference over the bank's own products and services," he said.
