Statements to Congress - Transcript

Federal Reserve Bulletin, Sept, 1997

The Need for Legislative Changes

The timing rules and the different disclosure requirements in TILA and RESPA are major obstacles to harmonizing the rules by regulation, beyond the actions that the agencies have taken. After a review of the public comments and upon further analysis, the Board and HUD thus concluded earlier this year that legislative changes are needed to accomplish congressional purposes. The Board published a Federal Register notice on April 2, stating our belief that making minor regulatory amendments would not be significant enough either to materially improve the disclosures for consumers or to justify the cost of the changes for the industry.

You asked the Board to comment on whether the purposes of TILA and RESPA might be better achieved by consolidation of the two statutes. At this stage it is not entirely clear whether targeted amendments to the existing statutes, or the creation of a new statute, would best accomplish the needed changes. These are among the issues that the Board and HUD are currently considering and that we will address in our recommendations to the Congress.

Timetable for Legislative Recommendations

The Board and HUD have a number of efforts under way to help us in developing our legislative recommendations. The Board's Federal Register notice of April 2 reopened the comment period for an additional 90 days so that interested parties could submit legislative proposals. That comment period ended on June 30, and we have received more than 100 comment letters. Perhaps because of coverage of the reform issue in a nationally syndicated column, most of the letters from this second round of comments are from consumers. Although the Board is still in the process of reviewing and analyzing the letters, we can provide some general impressions about them.

Consumers' primary concern is that they do not receive disclosures about mortgage costs earlier in the process. Under the existing rules, lenders are not required to provide the TILA disclosure, or a good faith estimate of the transaction costs, until at least three days after the consumer applies for the loan; and to apply, the consumer may have to pay a non-refundable fee. Most consumers who commented would prefer to receive disclosures that help them comparison shop before they apply for a loan and pay a fee. Second, consumers want the cost disclosures to be as accurate as possible so that they are not confronted with unexpected charges at the loan closing. And third, commenters generally believed that the disclosures could be less complex and therefore more useful.

Creditors that commented continue to support more fundamental reform, and a number of them reported that they are working on legislative proposals. As mentioned earlier, it now appears that this process for change has moved beyond streamlining and unifying disclosures to consideration of significant statutory reform. Despite the closing of the comment period, the Board would welcome these proposals whenever their sponsors are ready to share them.