• An extended transition period of at least several years will be required to implement many parts of the proposal. While the guaranteed mortgage package would not require a lengthy phase-in period except to resolve conflicts with some state laws, the good faith estimate revisions would require lenders to amend their loan requirements, train staff and check the quality of the disclosures.
• The proposed guaranteed mortgage package and the proposed revisions of the good faith estimate must be coordinated with the consumer protection disclosures of Regulation Z, the rule implementing the Truth in Lending Act. Otherwise, consumers will be confused by documents they receive at the same time. Both require disclosure of the loan’s annual percentage rate.
• HUD must consult with both the Financial Accounting Standards Board and federal bank regulatory agencies on the treatment of the guaranteed interest rate in the guaranteed mortgage package and the good faith estimate. The rate guarantee may affect the agencies’ analysis on an institution’s interest rate sensitivity.
• “We urge HUD to strengthen its review and enforcement program of lenders who are not otherwise examined and supervised,” said Taylor. In contrast, regular examinations of depository institutions include reviews of their policies and procedures, as well as specific transactions.
• Financial literacy is an important element of mortgage reform. “We believe that education must begin before the consumer makes an application,” said Taylor. “Homeownership counseling is a crucial step to purchasing a home.”

Testimony