Mortgage Bankers Call for New Regulations to Police Industry, Protect Borrowers

The Mortgage Bankers Association (MBA) is calling on Congress to adopt new legislation to establish uniform regulation of the industry nationwide and establish a new framework to protect borrowers.

In a letter sent to House Financial Services and Senate Banking committees this week, the MBA offered an outline for proposed legislation, titled the Mortgage Improvement and Regulation Act (MIRA), that would establish new uniform national lending standards to replace the current patchwork of state and federal lending laws and that would also establish a new federal regulator to implement and enforce these standards. "In order to restore confidence in the housing and mortgage markets, we need to ensure that many of the excesses that led to the current crisis aren't repeated," said John A. Courson, President and CEO of MBA. "For this reason, we are calling on Congress to create a new national regulatory framework to regularize the mortgage market and better protect consumers."

New regulatory agency called for

The MBA proposal calls for the establishment of new lending standard and the creation of a new regulator, the Federal Mortgage Regulatory Agency (FMRA). The new agency would be responsible for implementing the new mortgage standards, as well as regulating independent mortgage bankers and mortgage brokers in partnership with state regulators.

"Under our proposal, we are calling for one federal regulator to implement the standards and oversee all mortgage bankers and brokers," said Courson. "That regulator would work with the appropriate federal and state regulatory bodies to effectively enforce these tough new requirements."

Follows new state legislation in 2008

The proposal appears to be a reaction to a flood of mortgage legislation introduced in state legislatures over the past year in response to the subprime mortgage crisis. According to Entrepreneur magazine, hundreds of mortgage-related bills were introduced and advanced in state legislatures throughout the country, including Arizona, California, Maryland, Minnesota, Michigan, New Jersey, New Mexico, New York, North Carolina and Oregon. "Usually we track five to seven bills," an unnamed California MBA official told the magazine last fall. "This year (2008) we tracked more than 40 bills that would have had a direct impact on the mortgage banking industry in California."

MBA President Courson said the organization has long advocated for uniform national lending standards.

"One standard for all borrowers to learn and understand, and one standard for all lenders to follow will offer much better protection to consumers in every state and will help to lower costs," Courson said. "It will also significantly cut down on the confusing and often contradictory patchwork of state laws and regulations."