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Congress: Rolling Back Home-Buyers' Protections?

PHOTO: Bay State home buyers beware  financial watchdogs say big banks are trying to reopen the same loopholes that helped cause the mortgage meltdown. Photo credit: Deborah C. Smith.
PHOTO: Bay State home buyers beware financial watchdogs say big banks are trying to reopen the same loopholes that helped cause the mortgage meltdown. Photo credit: Deborah C. Smith.
November 27, 2013

DORCHESTER CENTER, Mass. - Many homeowners this year are thankful for signs of a recovering housing market and new rules limiting uncontrolled fees linked to the mortgage meltdown. But legislation in Congress would roll back some consumer protections, making it more costly for Massachusetts home buyers.

The new rules are working to ensure that banks don't issue mortgages to borrowers who aren't capable of repaying, said Gary Kalman, executive vice president of the Center for Responsible Lending. However, he added, the legislation known as the "Mortgage Choice Act" - HR 3211 and S 1577 - would undermine what he considers a fair and balanced compromise.

"There are many lenders and even banking trade associations that said they can live with the rule as is," he said. "There's just certain players that are trying to squeeze out every last dollar from a borrower that they can."

Current policies scheduled to go into effect Jan. 10 would cap "points and fees" for mortgages at 3 percent of the total loan amount.

If the Mortgage Choice Act passes, the 3 percent cap on fees set to go into effect in January goes away.

Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance, said the economic recovery has been slow, and opening up the floodgates for predatory lenders to gain a foothold again is something New England families can't afford.

"Consumers have a right to have a cap on fees," he said, "and this bill would create loopholes big enough to drive a truck through."

Kalman said nothing in the legislation would benefit home buyers. In fact, he added, he believes new policies are needed to ensure the housing market - which is key for the entire economy - recovers for individual home owners, not just banks or private investors.

"The housing market is a $10 trillion market," he said. "Stability, certainty is what the lenders are going to need in order to make sure that the market continues to grow."

Backers of the Mortgage Choice Act argue the current regulations are too stringent and changes are needed to clarify the definitions of "points" and "fees."

Track HR 3211 and S 1577 here and here.

Mary Kuhlman, Public News Service - MA