A government proposal to reform the nation's mortgage disclosure laws is seriously flawed, industry representatives told lawmakers Wednesday.

Witnesses at a joint hearing hosted by two House Banking subcommittees said the proposal failed to simplify current disclosure rules, which are supposed to help consumers comparison shop for loans.

Rep. Rick Lazio, who chairs the housing and community development subcommittee, agreed with much of the criticism. He said the proposal would not reduce paperwork, and would instead create an even more complex system for disclosing mortgage and closing costs.

But the New York Republican laid some of the blame on factional fighting within the mortgage industry.

John J. Hayt, former chairman of Equicredit Corp., Jacksonville, Fla., who testified on behalf of the National Home Equity Mortgage Association, criticized the proposal for shelving current disclosure rules in favor of a two-tier system in which different disclosure rules would be imposed in different situations.

"How would this simplify the process for a consumer?" he asked.

"The report as a whole presents significant regulatory burden and expense," said Daniel W. Morton, vice president and senior counsel at Huntington National Bank, Columbus, Ohio, who spoke on behalf of three bank trade groups.

Mr. Morton said it would be costly to implement a proposal to change the formulas for determining the annual percentage rate and finance charges, and not much of an improvement.

Industry witnesses also complained that the proposal-unveiled in July by the Federal Reserve Board and the Department of Housing and Urban Development, and drafted at the request of Congress-did not solve the legal crisis over mortgage broker fees.

Neill E. Fendly, vice president at the National Association of Mortgage Brokers, said his industry had more at stake in the issue than any other group and that "an immediate legislative solution" is needed.

This year alone, he said, 90 class actions have been filed over mortgage broker fees, which lenders pay brokers for referring borrowers to them.

Margot Saunders, the lone consumer advocate on the nine-witness panel, said "it would be wasteful and irrational for Congress to ignore the thoughtful recommendations made by HUD and the Federal Reserve Board."

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