As Congress pushed to adjourn Oct. 7, mortgage lenders were mounting a full-court press to reverse through legislation a court decision that, unless rendered moot, could force lenders to rescind many mortgage- based loans.
The provision would render moot a court decision now known generically as Rodash. The decision in Rodash vs. AIB Mortgage Co., No. 93- 4125, by the 11th Circuit Court of Appeals in Atlanta basically held that a $22 Federal Express charge for carrying a payoff of a pre-existing mortgage, and a $204 Florida intangibles tax assessed and collected at the time of a loan and passed through to the borrower at settlement were both finance charges under the Truth In Lending Act. As such, a panel of the court ruled, they needed to be disclosed under that category in making home equity loans.
The decision was handed up March 21, and the full court declined to review the case June 16.
Rodash was a class-action suit, and as a result similar complaints are being filed throughout the country. For example, a case with similar facts, Veale vs. Citicorp, was filed July 22 in federal court in Florida (Guilfoy vs. Suncoast Savings, No. 94-1500-CIV-MARCUS) and several other such cases were filed in Illinois in June and July.
As a result, lobbyists for lenders have been quietly working with members of Congress to reverse the effect of the court ruling. Wednesday night, Oct. 5, a provision overturning Rodash was attached to the Fair Credit Reporting Act, H.R. 5178. The bill is now before the Senate, where Sen. Connie Mack, R-Fla., is pushing to have the Senate pass legislation containing such a provision. The provision being pushed by Mack, and now a part of the Fair Credit Reporting Act, puts into law the Federal Reserve Staff Commentary on such disclosures that lenders have relied upon in preparing loan documents.
The Savings & Community Bankers of America calls the potential impact of the Rodash ruling devastating, adding that, Unless this bill is passed, mortgage lenders face huge potential losses.
The legislation would also provide regulatory relief to banks and thrifts doing business in the Georgia flood area.
The original purpose of the bill, revisions and clarifications in fair credit reporting rules, would impose new civil money penalties on lending institutions for failure to reinvestigate or correct consumer records in dispute. It would also require a number of additional written disclosures to consumers in case of adverse action.
Lending institutions, while unhappy with legislation, think it is the best they are going to get and by implication, are supporting the bill, according to several industry lobbyists.