Consumer agency wants to revamp lending

WASHINGTON – June 18, 2009 – A new consumer protection agency announced Tuesday by the Obama administration would overhaul current U.S. mortgage lending practices and boost oversight of the U.S. financial system. The administration hopes to avoid financial meltdowns in the future similar to the one that happened recently in the mortgage industry.Following the president’s proposal, the National Association of Realtors® (NAR) announced its support for tighter regulations. “Rebuilding consumer trust in the various markets is important to an economic recovery, and Obama’s proposed Consumer Financial Protection Agency offers the potential to regulate and protect consumers from fraud, predatory lending and other deceptive practices,” says NAR President Charles McMillan. “We look forward to working with Congress and the administration to shape such an organization.”According to a fact sheet distributed by administration officials, the agency would require lenders to offer mortgages with simple terms along with more complex loan products. It would require mortgage brokers to present homebuyers with the best available mortgage loans and ensure that borrowers could afford them. It would also create a ban on prepayment penalties and “yield spread premiums,” which provide an incentive for brokers to steer borrowers to more expensive loans.The proposal includes other elements to create oversight of the financial markets. Rules would apply nationwide to all lenders, although state laws could make the rules tougher.“NAR also appreciates elements of the proposal that will strengthen the national policy against mixing banking and commercial activities,” says McMillan. “This safeguard is in the best interest of consumers and the nation’s economy.”McMillan admits that it’s a big change. “Regulatory reform will be a monumental undertaking,” he says. “NAR looks forward to working with our members, Congress and the administration to craft a final product that allows for efficient, competitive and innovative markets, while providing consumers the protection they need and deserve.”The Mortgage Bankers Association is less unenthusiastic about the proposal. “This seems to be redundant of the current regulatory regime,” says Steve O’Connor, senior vice president for government affairs at the Mortgage Bankers Association. “We see the risk of duplicating efforts, of having overlapping standards and creating confusion in the marketplace. © 2009 FLORIDA ASSOCIATION OF REALTORS®