Bond Groups Urge Fed to Nix Assignee Liability

Two bond market associations are urging the Federal Reserve Board to be careful in writing new rules to stop abusive subprime lending practices and to ensure that any violations of its Home Ownership and Equity Protection Act regulation do not trigger assignee liability for mortgage investors."At a minimum, we request that, in any proposed and final regulations under Section 129, the Board explicitly confirm that violations of new substantive regulations may not be asserted against an assignee (unless the related loan is a high cost loan)," says a joint comment letter by the American Securitization Forum and the Securities Industry and Financial Markets Association. (The vast majority of subprime mortgages are not "high-cost loans" as defined by HOEPA.) The ASF and SIFMA also urge the Fed to concentrate on improving mortgage disclosures as the best way to protect consumers, as opposed to restricting prepayment penalties or requiring escrow accounts on subprime loans. "In our view, the Board should focus its efforts on preventing unfair and deceptive lending practices in connection with HOEPA loans through creating uniform mortgage disclosures for borrowers, and not prohibiting products or features that are not inherently unfair or deceptive."