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Congress: Rolling Back Home-Buyers' Protections?

PHOTO: The alarm bell has been sounded in Minnesota on legislation making its way through Congress. It could roll back a new 3 percent limit for "fees" and "points" on home mortgages, set to go into effect in January. Photo credit: Deborah C. Smith.
PHOTO: The alarm bell has been sounded in Minnesota on legislation making its way through Congress. It could roll back a new 3 percent limit for "fees" and "points" on home mortgages, set to go into effect in January. Photo credit: Deborah C. Smith.
December 2, 2013

SIOUX FALLS, S.D. - This year, many homeowners are thankful for signs of a recovering housing market and for new rules limiting uncontrolled fees linked to the recent mortgage meltdown. But legislation in Congress would roll back some consumer protections, making it more costly for South Dakota home buyers.

According to Gary Kalman, executive vice president of The Center for Responsible Lending, the new rules are working to ensure that banks don't issue mortgages to borrowers who aren't capable of repaying. But the legislation, known as the "Mortgage Choice Act," would undermine what Kalman 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. There's just certain players that are trying to squeeze out every last dollar from a borrower that they can," he charged.

If the Mortgage Choice Act passes, the 3 percent cap on fees set to go into effect in January goes away. Kevin Whelan, campaign director with the Home Defenders League, said the cap ensures lender profitability without hidden fees that drive up home-buying costs. He said families are still hurting from previous lending practices that weren't supposed to continue.

"And I've seen home ownership and community well-being stripped from families by the deliberate campaign of predatory and deceptive lending by the big banks, and by people that were working in collaboration or collusion with big banks," he declared.

Gary Kalman said there is nothing in the legislation that would benefit home buyers. In fact, he said, he believes new policies are needed to ensure that 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. Stability, certainty is what the lenders are going to need in order to make sure that the market continues to grow," Kalman stated.

Current policies, scheduled to go into effect January 10, would cap "points and fees" for mortgages at 3 percent of the total loan amount. However, backers of the Mortgage Choice Act argue that those current regulations are too stringent and that changes are needed to clarify the definitions of "points" and 'fees'.

The versions of the Mortgage Choice Act in Congress are: HR 3211, at govtrack.us and S. 1577, at govtrack.us.

Jerry Oster, Public News Service - SD