Does Mortgage Reform Have To Be Painful?

*Does Mortgage Reform Have to Be Painful?*
**By Leonard Ryan**

***This past summer, Brenda Hughes, senior vice president and retail lending administrator for First Federal Savings Bank in Twin Falls, Idaho, testified before Congress on the new mortgage disclosures and how to cut red tape for consumers and small businesses.

****Ms. Hughes voiced the frustrations of many lenders when she told the U.S. House of Representatives’ Subcommittee on Insurance, Housing and Community Opportunity: “My loan officers and loan administrative staff are the most discouraged. They have struggled since 2008 to keep pace with a steady stream of poorly-coordinated and often conflicting mortgage-related regulatory proposals. On top of integrating new rules, our staff must also anticipate additional changes as the Bureau [CFPB] implements the requirements of Title XIV of the Dodd-Frank Act. Today’s regulatory uncertainty coupled with the fear of making a mistake; has changed our focus from helping the consumer understand and navigate the process to a fixation on rules, forms and procedures.”

****However, Hughes did more than just complain during her time in the Capitol. She also outlined some modest steps that the CFPB and Congress should keep in mind when drafting new regulations. In conjunction with the American Bankers Association; below are the four suggestions presented to the regulators:

****1. New rules should, in fact, simplify a complicated process;

****A. To achieve truly effective reforms that benefit consumers, the changes to RESPA must be undertaken in conjunction with TILA disclosures to harmonize the two laws that guide consumers in the mortgage shopping process. That is what the process is all about—we must achieve greater simplicity and fluency.

****2. New rules should recognize the interactions, and reconcile the conflicts inherent in the mortgage regulatory structure;

****A. TILA and RESPA were originally designed to accomplish two separate objectives. By combining the disclosures of each law into one regulation and form, Congress must be careful to ensure that the differences and contradictions between the two laws are considered and addressed.

****3. The integration process should not be abused by adding rules that go beyond RESPA and TILA’s congressional intent.

****A. If the CFPB wants to add additional rules and customer protections, those need to be added and proposed using the existing process for drafting new regulations.

****4. Implementation time frames should be ample and adequate to accommodate industry need.

****A. Implementing any new regulation is a timely and costly undertaking for lenders as well as vendors. The CFPB should ensure that any changes include a time frame that gives lenders – and their compliance or technology vendors – ample room to build and test processes to comply with new rules.

****Today’s lenders want the mortgage industry to be a strong and healthy industry, now and for years to come. Consumers deserve to know what they are purchasing, and legitimate lenders want to ensure they are entering into business transactions that are profitable while serving the borrower’s need to purchase a home. Regulators, consumer advocates and lenders can and should work together to create a stronger, healthier mortgage industry.

Leonard Ryan is president of Laguna Hills, Calif.-based QuestSoft, a provider of automated compliance solutions and geocoding services to the mortgage industry. He can be reached at 800-575-4632 or For more information, visit