WASHINGTON The Mortgage Bankers Association condemned proposed changes to the Home Mortgage Disclosure Act on Tuesday.
The trade group charged that the changes to the HMDAs Regulation C, proposed by the Federal Reserve Board, would hurt consumers and impose additional costs and burdens on the lending community.
The Fed wants the act to cover more nondepository lenders and to require lenders to report the annual percentage rate of loans and whether loans are subject to the Home Ownership and Equity Protection Act. The Fed has said it hopes to unearth more information from the subprime mortgage market and improve fair lending analysis and enforcement.
However, in a press statement, the MBA argued that fair lending is not determined by pricing alone, but rather by the fairness of the pricing decision or, in cases where credit is not extended, by the factors used to deny a loan.
Rod Alba, the groups director of regulatory affairs, said the annual percentage rate has no meaning unless it is viewed in the context of all the credit-related information that lenders use to underwrite mortgage loans.
Although the APR figure may reveal that a lender priced a particular loan at what appears to be above the going market rate, it does not reveal whether that APR is justified based on the risk of the particular borrower in question, or whether it is higher because various fees or closing costs have been built into the interest rate, he said. Without this full picture, it is impossible to analyze the credit decision and determine whether lenders are engaging in potentially abusive or discriminatory practices.
The trade group also is concerned about the use of the annual percentage rate to determine whether lenders are practicing predatory lending, Mr. Alba said.
The MBA has great concerns that the added reporting requirements proposed by the Federal Reserve Board will inevitably lead to unfair presumptions of abusive and discriminatory behavior based simply on raw pricing figures, he said.