Housing Wire: Lawmaker, trade group thank the Fed for delaying 'duplicative' Reg Z rules
By Jon Prior
The Mortgage Bankers Association and Rep. Maxine Waters (D-Calif.) thanked the Federal Reserve for delaying three new rule proposals  Tuesday under Regulation Z.
The Fed was granted rulemaking authority under Reg Z, which took affect over the weekend and proposed the rules last year to clarify mortgage disclosures under Truth in Lending Act. The Fed said it delayed finalizing the rules, because the Consumer Financial Protection Bureau is required to review and possibly revise them again once it opens in July.
"It is wholly appropriate for the Fed to halt these rulemakings. All along we have asked the Fed to suspend its Reg. Z rulemakings, knowing that the CFPB would soon take up many of the same TILA issues," MBA CEO John Courson said. "A series of unnecessarily duplicative rulemakings would have increased confusion, regulatory burden and costs to the very consumers these rules should protect."
Waters, who is the ranking member of the House capital markets and government-sponsored enterprises subcommittee, praised the delay for different reasons. In December, Waters sent a letter to Fed Chairman Ben Bernanke highlighting concerns over changes to a borrower's "right of rescission." Currently, a borrower has the right to rescind a mortgage within three years of closing if the proper disclosures were not made.
Under the Fed's proposed rule, the borrower is required to pay off the remaining balance of the loan before the lender is required to give up the security interest. This, Waters said, eliminates "a powerful defense against foreclosure and providing a disincentive for servicers to engage in loss mitigation."
Waters said in a statement released this week that she is pleased Bernanke is working to not repeat the mistakes made before the financial crisis of 2008.
"By rescinding these proposed rules, the Fed is ensuring that homeowners continue to have a major defense against foreclosure and that elderly homeowners are protected from unscrupulous cross-selling," Waters said. "At a time when our housing market is in crisis, we need more protections for homeowners; not less."