Mortgage brokers and bankers are embarking on a campaign to persuade Congress to impose a temporary moratorium on class actions over the fees lenders pay to get loans.
The Mortgage Bankers Association of America, the Consumer Mortgage Coalition, and the National Association of Mortgage Brokers have drafted moratorium legislation, representatives of the brokers association said. In a Jan. 23 letter, the association asked its 5,000 members to lobby lawmakers to adopt the measure.
The push comes on the heels of a Virginia federal judge's order declaring that payments made to brokers to foster higher-rate loans are illegal under the Real Estate Settlement Procedures Act, or Respa. Class actions concerning broker payments are pending against more than a dozen lenders.
A moratorium on what the groups call "frivolous lawsuits" would give the Department of Housing and Urban Development time to overhaul Respa, said Charlie Frohman, congressional affairs director for the brokers association.
HUD has been weighing its latest batch of Respa revisions for two years. For the past month, it has been in talks with the Office of Management and Budget over a policy statement on permissible broker payments. Brokers and lenders complain the uncertainty is giving rise to litigation.
The mortgage groups' proposal, dubbed the Real Estate Settlement Procedures Act Class Action Relief Act of 1997, has yet to find a sponsor on Capitol Hill. And one Washington-based lawyer who represents lenders said Congress is unlikely to step in at this time.
"It will take a few more decisions," said the lawyer, who asked not to be named.