Treasury secretary Timothy Geithner wants federal regulators to move quickly in formulating new underwriting standards and disclosures for mortgages mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
"The rule-writing process traditionally has moved at a frustrating, glacial pace. We must change that," Geithner said in a speech at New York University's Stern School of Business.
Regulators are now in the process of outlining their rulemaking priorities, and will meet in September to establish a timeline for issuing proposed rules for public comment.
One priority is to combine the Truth-in-Lending Act and the Real Estate Settlement Procedures Act mortgage disclosure forms into one.
"Next month, we'll convene mortgage companies, consumer advocates, housing counselors and other experts to gather ideas on how to do that. We'll take the best ones, test them on consumers, and then soon be able to unveil a new, easy to understand, federal disclosure form," the secretary said.
"In addition, we will be inviting public comment on new national underwriting standards for mortgages, so that we can begin to shape the reforms of the mortgage market."
The Dodd-Frank bill creates mortgage lending standards under TILA to protect consumers, including restrictions on loan officer compensation and guidelines to determine if a lender has properly verified a borrower's ability to repay the loan.
Until the Consumer Financial Protection Bureau is operational, the Federal Reserve has authority to start the TILA rulemaking process for any new underwriting standards.
"If the Fed could be persuaded to act, they certainly have the legal authority to propose regulations for the ability to 'pay test' and loan officer compensation," said Glen Corso, managing director of the Community Mortgage Banking Project.
