It has been a busy letter-writing week for the National Association of Realtors.
The trade group for about 1.3 million Realtors announced Wednesday that it sent a letter urging the Federal Reserve System Board of Governors “to adopt regulations that combat unfair, deceptive and abuse mortgage lending acts and practices” in light of “the collapse of several investment funds and the failure of more than 100 subprime lenders.”
Pat V. Combs, the association’s president, said in a statement, “The Fed must act responsibly to protect consumers, and NAR pledges its support. We champion the principle that all mortgage originators should act in ‘good faith and with fair dealings’ in all transactions.”
Earlier in the week, the Realtor group joined with the Mortgage Bankers Association and the National Association of Home Builders trade groups in a letter to the U.S. Office of Federal Housing Enterprise Oversight that urges that agency “to temporarily increase the caps on the investment portfolios of Fannie Mae and Freddie Mac, with appropriate conditions, to help inject needed liquidity and stability into the mortgage market.”
The groups also stated in that letter, “The nation’s mortgage markets are facing a liquidity crisis of a force and magnitude not seen in decades. The chill will have far-reaching effects throughout the housing market if stability is not restored.”
NAR’s letter to the Fed, meanwhile, seeks a range of restrictions on lending practices, such as a ban or severe restrictions on the use of prepayment penalties for subprime mortgages. Such penalties can “haunt” homeowners when they try to refinance, Combs stated, and can have the impact of trapping homeowners into an undesirable mortgage.
The letter also urged the Fed to require that subprime lenders provide an escrow reserve for taxes and insurance, which “will protect borrowers from large payments they can’t afford and help insure they understand the total cost of their monthly mortgage,” Combs stated.
The group, which adopted a set of goals for responsible lending practices earlier this year, also is pushing the Fed board to mandate underwriting standards that require all mortgage originators to verify a borrower’s ability to repay a loan, and to ensure that “stated-income” and “low-doc” loans are used only sparingly.
Also among NAR’s Fed wish list:
- Adopt anti-mortgage-flipping regulations that require lenders to verify that the new loan provides a significant benefit to the borrower;
- Encourage lenders to use alternative credit histories for borrowers with little or no credit histories;
- Require all institutional lenders to periodically report borrowers’ payment histories to at least three national credit bureaus;
- Require lenders to offer borrowers mortgage choices with interest rates and fees that reflect the borrower’s credit risk;
- Working with the U.S. Department of Housing and Urban Development, improve consumer mortgage disclosure under the Real Estate Settlement Procedures Act (RESPA).
“NAR believes that existing guidelines are not enough to protect consumers, and is pleased that the Board has made the first step toward this rulemaking. However, we still believe that each state should retain the authority to adopt its own high standards,” Combs stated.