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MBA submits formal response to SEC regulatory proposals on credit rating agencies

National Mortgage Professional
Jul 29, 2008

NAMB applauds Federal Reserve Board's final HOEPA ruleMortgagePress.comNAMB, mortgage broker, HOEPA, Federal Reserve Board, Federal Trade Commission, HUD, GSEs The National Association of Mortgage Brokers (NAMB) has applauded the release of the Final Rule Amending Home Mortgage Provisions of Regulation Z (Truth in Lending). NAMB submitted a formal comment letter to the Federal Reserve Board (FRB) on April 8, 2008. "The final rule is a clear victory for consumers," said NAMB President Marc Savitt, CRMS. "It promotes clarity and professionalism throughout the industry." NAMB also applauds the rule's requirement of accuracy and balance in advertisements as well as the establishment of escrow accounts. The advertising rules will protect consumers from deceptive or misleading advertising practices. NAMB supports the requirement that the lender establish an escrow account for the payment of property taxes and homeowners' insurance for first-lien loans. The lender may offer the borrower the opportunity to cancel the escrow after one year. The final rule withdraws the FRB proposed rules broker-only disclosure of yield-spread premiums (YSP). The FRB removed the proposal due to compelling evidence from consumer testing. The removal reaffirms the findings in two Federal Trade Commission (FTC) studies in 2004 and 2007. According to the studies, disclosure of YSP created confusion among borrowers and caused many consumers to choose more expensive loan products. "NAMB commends the Federal Reserve Board for taking steps to allow consumers to shop effectively for the loan that fits their needs," said Savitt, "It is regulation of the practice and not the license. That is true consumer protection." NAMB also calls for the immediate suspension of the Department of Housing and Urban Developments (HUD) Real Estate Settlement and Procedures Act (RESPA) reform proposal based on the findings of FRB tests and FTC consumer tests. These multiple studies indicate that consumers are more likely to choose higher cost loans because of the HUD requirement that brokers disclose YSP. This requirement has cost consumers hundreds of millions of dollars since 1992. It is time to put an end to this misguided approach. Therefore, NAMB is calling on HUD to remove the disclosure of YSP so as to not confuse consumers and promote clarity in the mortgage loan process. NAMB also calls for the suspension of the agreement between the New York Attorney General Andrew Cuomo, government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and the Office of Federal Housing Enterprise Oversight (OFHEO). Unlike the FRB's final HOEPA rule, the agreement was not put through a formal notice and comment period. The FRB's final rule also prohibits creditors or mortgage brokers from coercing, influencing, or otherwise encouraging an appraiser to provide a misstated appraisal. NAMB strongly supports this approach to ensuring honesty and professionalism in the appraisal process. NAMB believes that the appraisal agreement reached by New York Attorney General, the GSEs and OFHEO will hurt small businesses thereby increasing costs to consumers. NAMB continues to review and analyze the final FRB HOEPA rule and its implications for the mortgage industry. For more information, visit
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