Feds Set For Another HOEPA Earful by Broderick Perkins
The Federal Reserve Board has set June 14 for a public hearing on the Home Ownership and Equity Protection Act (HOEPA) frequently called upon to curb predatory lending. HOEPA was enacted in 1994 in response to reports of predatory home equity lending practices in underserved markets. Today underserved markets are swamped with failing subprime and nontraditional loans that are failing at historic levels and draining the level of homeownership. HOEPA amended the Truth in Lending Act (TILA) to impose additional disclosure requirements and other limits on certain high-cost, home-secured loans. HOEPA also authorizes the Fed to issue rules that prohibit certain acts or practices in connection with home mortgage loans and directs it to periodically hold public hearings to examine the home equity lending market and the adequacy of existing regulatory and legislative provisions for protecting the interests of consumers, particularly low-income consumers. The Fed has already conducted four hearings in the summer of 2006 to address predatory lending and the impact of the existing HOEPA rules and state and local anti-predatory lending laws on the subprime market; nontraditional mortgage products such as interest-only mortgage loans and payment-option adjustable rate mortgages (ARMs), and reverse mortgages; and how consumers select lenders and mortgage products in the subprime mortgage market. The latest hearing is designed to determine how the Fed can use its rulemaking authority to address concerns about abusive lending practices in the home mortgage market, especially the subprime sector, in a way that preserves incentives for responsible lenders to provide credit to borrowers while protecting borrowers. Hearing participants will discuss prepayment penalties; escrow accounts for taxes and insurance on subprime loans; "stated income" or "low doc" loans and the consideration of a borrower's ability to repay a loan, all factors in the current market of failing subprime loans. The Fed will also examine something critics have hammered at since subprime loans became problematic -- the effectiveness of state laws that have prohibited or restricted these and other terms or practices, and whether the Fed should consider adopting similar regulations to curb abusive lending practices. Striking a balance between serving consumers and allowing lenders to offer subprime mortgages en masse won't be easy. "The goal is to find ways to promote sustainable homeownership through responsible lending, informed consumer choice, and effective guidance and regulation," said Federal Reserve Board Governor Randall S. Kroszner, the hearing's chair. "We want to encourage, not limit, mortgage lending by responsible lenders, so it is crucial that any actions the Board might take are well calibrated and do not have unintended consequences," Kroszner added in a prepared statement announcing the hearing. The June 14 hearing will be conducted at the Federal Reserve Board at 20th and C Streets, N.W., Washington, D.C. and will include both panel discussions and timed statements of up to three minutes. Written statements of any length also can be submitted for the record. | 
