A new bill aimed at cracking down on deceptive practices in mortgage servicing and coercion of appraisers has the support of consumer groups and a group representing appraisers.
Introduced Tuesday by Rep. Paul Kanjorski, HR 3837 — the Escrow, Appraisal, and Mortgage Servicing Improvements Act — would update the Real Estate Settlement Procedures Act (RESPA) to create new requirements for mortgage servicers.
The bill would require escrow accounts on high-cost loans to be used to make property tax and insurance payments, place restrictions on “force-placed” insurance, and require loan servicers to respond more quickly when borrowers report errors in their payment histories.
The National Community Reinvestment Coalition welcomed the new regulations, saying borrowers without escrow accounts are often surprised when property taxes and insurance are due and haven’t budgeted for them. And borrowers can end up in default or foreclosure if abusive loan servicers don’t correct errors in their payment histories, the group said.
The bill also seeks to give appraisers greater independence by creating new standards within the Truth in Lending Act (TILA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
The standards would penalize parties involved in a real estate transaction for attempting to influence the independent judgment of an appraiser through collusion, coercion and instruction, and punish appraisers who have direct or indirect interest in a property or transaction.
HR 3837 seeks to improve federal oversight of appraisals by giving the Appraisal Subcommittee — a group of federal financial regulators housed within the Financial Institutions Examination Council — a consumer protection mandate, along with more authority to monitor the performance of state appraisal agencies.
The bill’s introduction was welcomed by the Appraisal Institute, a group that claims to represent 22,000 real estate appraisers, which said it has long advocated many of its provisions.
“We are particularly pleased to see that H.R. 3837 promotes appraiser independence because an independent appraiser is best able to help ensure the integrity of the lending process for the benefit of the consumer and the financial institutions involved,” said Appraisal Institute spokesman Don Kelly in a statement.
Kanjorski, D-Pa., said in a statement that House Financial Services Committee chairman Rep. Barney Frank, D-Mass., is a co-sponsor of the bill, and that he expects the bill will also have the support of real estate professionals and “responsible mortgage originators.”