ANNAPOLIS, Md. - Everyone complains about regulatory burdens, but until recently, few had detailed plans for fixing compliance problems.
Members of the Maryland, Delaware, and West Virginia state banking associations, meeting here recently, put some meat on the bones of regulatory relief.
"This is the only way any meaningful reform can occur," said Richard C. Insley, vice president of Signet Bank, Richmond, Va.
Of 13 areas targeted, the 90 bankers at the meeting agreed that Truth- in-Savings, Truth-in-Lending, the Home Mortgage Disclosure Act, and Real Estate Settlement Procedures Act are most burdensome.
Regulation DD, which enforces Truth-in-Savings, ought to be scrapped outright, the bankers said.
If repealing the law is not feasible, the Federal Reserve Board should at least stop trying to recalculate annual percentage yield to capture the time value of interest, the bankers said.
Even with such a change, consumers would remain confused by conflicting yields and interest rates, the bankers concluded. Their response: Eliminate or deemphasize APY disclosures.
"Truth-in-Savings is a case of legislative overkill," said Mr. Insley. "No one can even agree what an APY is."
Truth-in-Lending and its Regulation Z also should be streamlined by cutting its text and accompanying commentaries by half, the bankers suggested.
"Reg Z is the most violated rule because it is so complicated," Mr. Insley said.
A Reg Z advisory group, made up of bankers, consumers, and regulators, ought to be created to figure out the best way to simplify the rules, the bankers said.
Specifically, bankers want to exempt loans of more than $250,000 from the rules and revamp adjustable-rate disclosures.
Loans to people for investment purposes, which are exempt from state usury laws, also should be exempt from Reg Z, the bankers said.
And they added that regulators ought to be more forgiving of unintentional Reg Z violations and more tolerant of isolated HMDA reporting errors that are not evidence of patterns of abuse.
Because Truth-in-Lending, HMDA, and Respa overlap, the bankers suggested folding all rules governing residential mortgage lending into one regulation.
The problem, said Signet's Mr. Insley, is that agencies such as the Fed and the Housing and Urban Development Department write rules so differently that they even have conflicting definitions.
Bankers also blasted HUD's enforcement of Respa, suggesting that the agency write a commentary to explain the rules. HUD does plan to write a commentary for Respa, which was designed to prevent kickbacks among people involved in real estate settlements, including banks, real estate agents, and attorneys.
Bankers at the meeting also proposed exempting certain types of loans from Respa, including second mortgages, commercial-purpose loans secured by residential real estate, and loans with no closing costs imposed on the borrower.
The Middle Atlantic bankers may get some of their wishes. In the Senate, Richard Shelby, R-Ala., and Connie Mack, R-Fla., are co-sponsoring a regulatory relief bill that targets those four laws for reform. Rep. Doug Bereuter, R-Neb., has introduced similar legislation in the House.
Mr. Insley is optimistic. "We can both accomplish what Congress wants to achieve and cut down on cost for the bankers," he said.
