MBA, CMC Offer Support for Proposed Risk-Based Pricing Rule

MBA (8/19/2008 ) Sorohan, Mike
The Mortgage Bankers Association and the Consumer Mortgage Coalition, in a joint letter to the Federal Reserve and the Federal Trade Commission, expressed strong support for proposed federal rules that would establish exceptions to risk-based pricing notice requirements and implement model disclosure forms.
The letter to Federal Reserve Secretary Jennifer Johnson and FTC Secretary Donald Clark commended the agencies for the proposed rules and urged their approval with minor modifications.

“The resultant proposals in our view constitute well-tailored requirements,” wrote MBA Chairman Kieran Quinn, CMB, and CMC Executive Director Anne Canfield. “Their finalization will help assure that borrowers gain information they need to know concerning the relationship of their credit scores to mortgage pricing without unduly interfering in the credit process and resulting in unnecessarily higher costs to borrowers.”

The proposed rule, issued May 19, would establish regulations and model disclosure forms to implement Section 311 of the Fair and Accurate Credit Transactions Act of 2003, which amends the Fair Credit Reporting Act. The proposed rule would: (1) Define key terms; (2) Describe circumstances when a risk-based pricing notice must be provided; (3) Specify the content of the notice; (4) Specify the timing of the notice; (5) Deal with other operational matters; and (6) Establish requirements for exceptions to the risk-based pricing requirements. It also contains model forms.

MBA and CMC said they support the “broad contours” of the rule, particularly the exception to the general risk-based pricing notice requirement that allows mortgage lenders to provide an alternative, upfront notice, which would be combined with the existing credit score notice, to mortgage borrowers. However, the groups expressed concern that mortgage brokers would be allowed to provide this alternative notice to a borrower, as they now provide the credit score notice and that once a broker does so, the lender should be deemed to comply with the exception.

“The mortgage industry is committed to ensuring that consumers receive clear and complete information to help them navigate the mortgage process including relevant information on the relationship between a borrower’s credit record and his or her interest rate,” MBA and CMC said. “The Associations appreciate the availability of additional information that is useful to the consumer and provided in a manner that will help consumers understand how their credit relates to their loan rate, whether their credit records deserve attention and how they can seek to correct their records if necessary.”