Lenders and consumer groups are asking for a combination of regulatory and legislative changes to simplify disclosure requirements placed on mortgage lenders.
In particular, trade groups for lenders and brokers called for significant-though not specific-legislative changes. Their requests were in comment letters recently submitted to the Federal Reserve Board and the Department of Housing and Urban Development.
In response to a congressional mandate, the Fed and HUD in late December invited public suggestions on how the Truth-in-Lending and Real Estate Settlement Procedures acts could be simplified. The agencies are concentrating on the disclosures for closing costs, escrow accounts, affiliated business arrangements, and rescission notices.
Lenders complain the laws create burdensome paperwork and expose them to lawsuits.
The Mortgage Bankers Association of America said its own task force concluded that home loans should be regulated under a separate law. The trade group questioned whether Respa's prohibition of referral fees and TILA's annual percentage rate disclosures serve any purpose. The group has hired a firm to survey consumer attitudes over the next several months.
"It is entirely possible that we will end up advocating such sweeping reform of the current statutory scheme as to make considering how to streamline and consolidate the existing disclosures an empty exercise," wrote Warren Lasko, the MBA's executive vice president. "There is an emerging consensus that broad-based reform will be seriously considered during the 105th Congress."
The National Association of Mortgage Brokers described Respa and TILA disclosure requirements as "excessive, confusing, and difficult to comply with."
"The extent of these problems highlights the pressing need for a legislative overhaul of mortgage lending statutes," wrote Brian J. Kinsella, the broker group's executive vice president. However, the group said it was not yet ready to make a legislative proposal.
Both the MBA and the NAMB asked the Fed and HUD to conduct public forums.
Several bankers weighed in with detailed suggestions for both regulatory and legislative changes, such as improving the descriptions of interest rates and finance charges, and shortening or easing the mandatory three- business-day cancellation period. The Credit Union National Association suggested that HUD consolidate various transaction disclosures into one booklet.
The Fed and HUD are expected to incorporate the comments as part of a detailed proposal this spring.