ALTA® Letter to Jim Leach - RE: Predatory Lending (5/26/00)
May 26, 2000
May 26, 2000
The Honorable Jim Leach
Committee on Banking and Financial Services
United States House of Representatives
Room 2129 Rayburn House Office Building
Washington, D.C. 20515
We respectfully request that the following statement on the views of the American Land Title Association, with respect to predatory lending legislation, be included in the record of the Committee?s hearing on predatory lending held on May 24, 2000.
The statement expresses our support of a solution to address a problem which is affecting consumers and neighborhoods throughout our country. We hope that the Congress, Federal regulators, and the lending community develop a workable solution. As our members conduct most of the closings in the country, we have substantial expertise in mortgage products and settlement procedures, and accordingly point out several technical issues which we believe need to be addressed should the Committee choose to move legislation.
We are concerned that Congress, in reducing the thresholds for determining when loans are subject to the additional limitations and restrictions imposed by HOEPA (Homeownership and Equity Protection Act) and in eliminating the current exclusion for "residential mortgage transactions," does not inadvertently reduce the availability of legitimate financing to low-income or less-than-prime borrowers.
Second, H.R. 4250, the "Predatory Lending Consumer Protection Act" eliminates a current provision of HOEPA excluding certain title charges and fees from the calculation of points and fees that contribute to a high cost loan. We believe that, as under current law, if the lender is not benefitting from the charge, the charge is made by an unaffiliated third party, and the charge is reasonable, the charge does not affect in any way whether the loan is "predatory." As Congress correctly concluded in 1994, there is no reason why such charges should be included in determining the trigger for HOEPA coverage. We hope that the Committee keeps in mind that title insurance fees are regulated in most states, that these fees are based on costs and risk, and that adherence is required to ensure solvency and consumer protection. Accordingly, we recommend that § 2(b)(3) of H. R. 4250, to the extent that it eliminates the third-party charge exemption from the current language of § 103(aa)(4)(C) of the Truth In Lending Act, be changed so as to leave in place current law.
We are concerned that the language of new §129(k)(1) in Hr. 4250 states that "no creditor or other person may require or allow" the collection of such premiums. The "no . . . other person may . . . allow" language is unnecessary, ambiguous, and would set a questionable legislative precedent. We urge the Committee to drop that provision.
Finally, we are concerned about a provision in Rep. Schakowsky?s bill HR 3901, the "Anti-Predatory Lending Act " which provides that conforming home loan documents in which blanks are left to be filled in after the contract is signed shall not be enforceable under Federal law or the law of any State." We believe this exclusion is overly broad, and should be narrowed if retained.
Please feel free to contact me if you should have any questions or concerns.
Ann vom Eigen,