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Brokers prove to be the better bet: New study shows consumers pay lower rates with mortgage brokers

National Mortgage Professional
May 23, 2005

Responsible lending act met with praise--Professional organizations push for congressional hearingsmortgagepress.comResponsible Lending Act of 2005, abusive lending, legislation The Responsible Lending Act of 2005, the bi-partisan bill co-sponsored by Reps. Bob Ney (R-Ohio) and Paul Kanjorski (D-Pa.), continues to reap praise as professional associations rally around the groundbreaking piece of legislation. Although met with some opposition from consumer advocacy groups, many believe this bill will act as a vehicle for changing predatory lending practices. "This bill is a solid step toward achieving the twin goals of protecting consumers from fraud and enhancing homeownership opportunities--objectives shared by those on both sides of the debate," stated Kurt Pfotenhauer, senior vice president for government affairs for the Mortgage Bankers Association. The MBA is joined by a host of supporters, including the National Association of Mortgage Brokers, the Coalition for Fair and Affordable Lending (CFAL) and the Appraisal Institute. These associations have long advocated the passage of legislation that creates uniform federal standards in lieu of the current conflicting patchwork of differing state and local laws regulating mortgage lending. Included in the reform are provisions to lower the HOEPA points and fees test from eight to five percent, restrict prepayment penalties to three years (and limit the amount of the penalty), and set new appraisal and services requirements for loans covered under bill. Don Kelly, vice president of public affairs for the Appraisal Institute, applauds the new standard, which would aid in abating appraiser intimidation and improve accountability and enforcement practices of federal and state appraiser regulators. "For the appraisal community," he says, "this bill addresses the toughest issues we have raised over the last several years." While many professional organizations back the predatory lending bill, it is met with some opposition from consumer advocacy and civil rights groups. The National Consumer Law Center says the bill would "eviscerate" state and federal protections; the U.S. Public Interest Research Group says predatory lenders are seeking "federal safe harbors from strong and innovative state consumer protections;" and the Consumer Federation of America states that the bill "does not provide the necessary safeguards that would truly eliminate incentives for lenders to make predatory loans." Consumer advocates have lent their support to an alternative bill, co-sponsored by Reps. Brad Miller and Mel Watt of North Carolina and Barney Frank of Massachusetts, which they feel strengthens defenses against predators. While professional and consumer organizations take varying stances on the bill, CFAL Vice Chairman Terry Theologides notes, "After more carefully studying the bill's text, CFAL, consumer advocacy groups and others will undoubtedly suggest some refinements, but the time has come for Congress to act on these issues." The bill currently awaits a hearing from the House Financial Services Committee.
May 23, 2005
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