Realtors® Support Mortgage Lending Reform

To help Americans continue to achieve their dreams of homeownership, there must be a balance between safeguarding consumers in the lending process and ensuring reasonable access to mortgage capital. That is the message that the National Association of Realtors® delivered to Congress today, reiterating its support of comprehensive legislation to reform mortgage lending.

At a House Financial Services Committee hearing, NAR President Charles McMillan testified that reform to the mortgage lending system is needed to restore consumer confidence in the economy and the housing market. “Historically low mortgage rates and a significant tax credit for first-time home buyers have begun to bring people back to the housing market. However, we need wholesale reform of the mortgage lending sector to give consumers the protection they need and the confidence necessary to expedite the housing recovery,” said McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth.

The recently introduced Mortgage Reform and Anti-Predatory Lending Act of 2009, H.R. 1728, contains many of the reforms NAR has been seeking, but McMillan cautioned against overregulation. “We must strike an appropriate balance between safeguarding consumers and making sure they have access to mortgages at a reasonable cost. Undue regulation of the mortgage market could be as harmful to consumers as the lack of regulation that led to irresponsible lending and other abuses,” McMillan said. “We must be sure there are no unintended consequences here.”

NAR believes the current definition of mortgage originator as “any person who assists a consumer in obtaining or applying to obtain a residential mortgage loan” is too broad, since Realtors® as part of their normal level of service provide advice, counsel and assistance across all aspects of the real estate transaction. In addition, NAR supports the safe harbor provisions in the legislation, but as written, these provisions may be too narrow.

“The safe harbor should include more products than 30-year fixed-rate mortgages. We need to protect more home buyers from risky lending products, and that requires some flexibility in financing terms,” McMillan said.

NAR supports regulations that require lenders that make subprime mortgage loans to establish appropriate escrow accounts. Borrowers making at least a 20 percent down-payment should have the option to budget for these payments independently.

NAR also believes that a strong and independent appraisal industry is vital to restoring faith in the mortgage origination process. “H.R. 1728 strikes a good balance by strengthening the accountability and oversight of appraisers while creating new consumer protections,” said McMillan.

“We applaud the efforts of this committee and the authors of H.R. 1728. This bill is a major step in the right direction and we look forward to working with Congress to adjust and improve the legislation to make it even more meaningful and safe for all consumers,” McMillan said.

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