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.
