Action on Legislation

Reverse Mortgages

The Senate approved legislation April 25 that would let the Department of Housing and Urban Development prohibit "excessive" fees on reverse mortgages.

Senate Banking Committee Chairman Alfonse M. D'Amato, who sponsored the bill, said the legislation would prevent "scam artists" from charging senior citizens for information on reverse mortgages that HUD provides for free.

If the bill is enacted, HUD Secretary Andrew Cuomo has said, lenders that do business with lawbreakers will be banned from all agency programs.

Similar legislation has been introduced in the House by Rep. Rick Lazio, R-N.Y.

Private Mortgage Insurance

The House approved legislation April 16 that would automatically cancel private mortgage insurance when a borrower's equity in a home reaches 25%.

The bill, introduced by Rep. James V. Hansen, R-Utah, also would require lenders to make annual disclosures showing how much a borrower would have to pay on the loan to avoid mortgage insurance.

Sen. D'Amato canceled his panel's March 17 vote on similar legislation after fellow Republicans told him they wouldn't support the bill. The New York lawmaker said he would try to negotiate a deal and bring the legislation before the committee again.

Currently his plan would require lenders to cancel mortgage insurance automatically when equity in a home reaches 20%. New Legislation


Rep. Marge Roukema, R-N.J., has introduced legislation that would make it easier for state-chartered banks to branch across state lines.

The bill would let state banks exercise powers allowed by their home state regulators when they branch into other states.

However, these activities would be limited to those also permitted to national banks.

The bill is supported by the Conference of State Bank Supervisors, which argues that state banks would increasingly switch to national charters to avoid the hassle of conflicting state laws after the Riegle-Neal interstate branching law takes full effect June 1. Pending Legislation

Financial Modernization

To appease critics of its sweeping financial reform package, the Treasury Department is offering to prohibit mergers between bank holding companies and the largest 1,000 nonfinancial corporations.

However, Treasury Secretary Robert Rubin has given no indication when the long-delayed plan will be unveiled.

Recognizing that there is broad support for some mixing of banking and commerce, House Banking Committee Chairman Jim Leach has repeatedly urged lawmakers to keep cross-industry mergers as small as possible. Rep. Leach's bill would let bank subsidiaries enter many new businesses directly but would bar affiliation between banks and nonfinancial firms.

Lawmakers have introduced two other financial modernization proposals. Sen. D'Amato and Rep. Richard Baker introduced identical bills Feb. 11 that would remove all barriers preventing banks from affiliating with other types of companies. Rep. Marge Roukema's plan would let banking companies earn up to 25% of their revenue from nonfinancial business lines.

Federal Home Loan Banks

Rep. Baker said he would drop plans for radical reform of the Federal Home Loan Bank System and instead introduce narrow legislation designed to shore up its finances. The bill, expected to be introduced shortly, would replace his earlier plan to let the system expand into community and rural lending.

His bill would make membership in the system voluntary, even for thrifts. He also plans to reduce the cost of membership by reducing the amount of capital each Home Loan Bank must hold. The bill would also require each of the 12 district banks to pay a fixed percentage of earnings to cover the system's $300 million annual obligation on Resolution Funding Corp. bonds.

Similar legislation is expected from Sen. Lauch Faircloth, R-N.C.

ATM Fees

Rep. Bernard Sanders, I-Vt., introduced legislation Feb. 13 to prohibit banks from charging noncustomers for using their automated teller machines.

Similar legislation is expected from Sen. D'Amato.

Banks would be forced to post surcharge fees on ATM screens and give customers the option of canceling a transaction under a bill introduced by Rep. Roukema.

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