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| NAR to Banks: Higher Lending Standards Needed |
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(May 8, 2007) --
The NATIONAL ASSOCIATION OF REALTORS ® is calling on bank regulators to adopt higher lending standards while giving lenders more flexibility in determining whether homebuyers can afford to meet their loan obligations.
In a comment letter submitted to John Dugan, comptroller of the Currency, NAR offered a number of suggestions to federal banking regulators and the National Credit Union Administration on their Proposed Statement on Subprime Mortgage Lending, published in the March 8 Federal Register. NAR agrees with many of the comments and principles of the statement, and also offered key features of its own newly adopted Enhanced Subprime Lending Policy. The policy proposes solutions to avoid repeating the mistakes that led to the current problems surrounding an increased rate of foreclosures and families facing default in their mortgages.
“NAR stood ready during the boom years and continues to be ready during these difficult times to help people who want to buy a home and for families trying to keep theirs,” says NAR President Pat V. Combs. NAR provides REALTORS ® with educational information, including a series of consumer brochures, designed to help homebuyers understand the complexities of buying and financing a home. One brochure focuses exclusively on the dangers of many of the “exotic” loans being offered.
NAR Proposes Changes
In its letter, NAR stated that all mortgage originators must act in “good faith and with fair dealings” in each transaction. NAR supports loan underwriting standards for all mortgage originators that include verification that the borrower has the ability to repay the loan based on all its terms, including higher payments based on interest rate adjustments and allowing for taxes and insurance.
“We would also like to see subprime lenders reviewing and insisting on a reasonable debt-to-income ratio,” Combs says. “Again, this transaction is not just about buying the house and being done with it. It is about ensuring that once a family has a home they have the ability to keep it.”
NAR's enhanced subprime policy recommends that lenders require escrow amounts for taxes and insurance in the monthly payment on subprime mortgages. It also suggests that there should be long-term flexibility for borrowers who have demonstrated the ability to make their monthly payments.
Other recommendations from NAR's enhanced policy include eliminating prepayment penalties for all mortgages, establishing an anti-mortgage-flipping rule, and requiring that mortgage originators offer borrowers mortgage choices.
“The proposed guidance will have an impact on the availability of homeownership financing and therefore is of vital concern to REALTORS ® ,” Combs says.
NAR urges banking agencies to work closely with responsible lenders, especially those who have extensive experience in the subprime mortgage market, to ensure that borrowers with the financial capacity will continue to have access to fair and affordable mortgage loans.
A House Financial Services Subcommittee will hold a hearing tomorrow, May 8, on the role of the secondary market in subprime mortgage lending. NAR will submit testimony that elaborates on its Enhanced Subprime Policy and pledges support to further educate its members and their clients.
— REALTOR® Magazine Online
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| Reprinted from REALTOR® Magazine Online (http://www.realtor.org/realtormag) May 2007 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2007. All rights reserved. |
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