Regulators Unveil TILA/RESPA Reforms

The Federal Reserve Board and the Department of Housing and Urban Development have split over ways to curb predatory lending, which is expected to diminish the impact of their mortgage reform recommendations the two agencies presented to Congress Friday.The joint report on modernizing the Real Estate Settlement Procedures Act and Truth in Lending Act calls for amending the Home Owners and Equity Protection Act to prohibit balloon payments and upfront payments of credit insurance premiums on high-cost mortgage loans. HUD parts company with the Fed, however, and goes on to recommend that HOEPA coverage be expanded to cover more loans by lowering the interest rate and fee thresholds and that the financing of closing costs be restricted to prevent loan flipping. In addition, HUD recommends that Congress consider establishing a federal unfair and deceptive practices standard as a private remedy for transactions that are unfair and unconscionable. There is a lot of industry opposition to a UDP standard because lenders are afraid it will lead to more class action lawsuits.