MBA Blasts 'Suitability Standard'

Adoption of a "suitability standard" would reverse long-standing efforts to increase homeownership and fairness in lending and put pressure on lenders to deny credit in order to protect themselves from liability, according to a position paper issued by the Mortgage Bankers Association."A subjective suitability standard, combined with a private right of action, would be a poison pill for the dream of homeownership for all except the most economically secure Americans," said MBA's top lobbyist, Kurt Pfotenhauer. The MBA has issued the 34-page position paper to marshal legal and economic arguments in an effort to warn Congress about the damage that could be done by inserting a suitability standard into a predatory-lending bill. (Under such a standard, brokers and lenders would be required to provide the loan most "suitable" for each borrower's circumstances.) Consumer groups are pushing for a suitability standard, and their efforts have gained traction on Capitol Hill. The position paper also takes issue with the notion that specific loan products, specifically adjustable-rate subprime loans, are driving foreclosures up. The MBA stresses that its data continue to show that job loss, divorce, medical problems, and other personal difficulties are the main reason for rising delinquencies and defaults. The MBA can be found online at http://www.mortgagebankers.org.