Rx for Mortgage Disclosures by Lew Sichelman
John Robbins had a revelation the other day when he went to the drug store to pick up his blood pressure medication. "Pharmacies must detail the list of side effects of the prescriptions they fill," the next chairman of the Mortgage Bankers Association thought, "So why shouldn't we list the negative aspects of the various loan options borrowers are considering?" The light bulb went on, and now Robbins is forming a special task force to look into the benefits of a simple, easy-to-understand tool that spells out the strengths and weakness of the loan the borrower has chosen. "I see it as final gut-check for the borrower," the industry leader said last month at the MBA's National Secondary Market Conference in Chicago. "Here's what you've chosen. These are all the risks, and these are the possible rewards." Currently the MBA's Chairman-elect, Robbins is calling on Fannie Mac, Freddie Mac and the MBA's Residential Board of Governors, or RES-BOG, to develop recommendations for an industry-wide disclosure document, and when and how best to deliver the document to borrowers. Although some might see another form as just more paperwork in a business that is already drowning in paper, and others might look at it as a way to "dampen the enthusiasm" of state and local legislators to pass punitive laws, the chief executive officer of the American Mortgage Network in San Diego sees it as bringing more transparency to the lending process. "This isn't about the industry being nervous," he told the conference. "It's about helping consumers make truly informed choices" and showing that their welfare is of the utmost importance. "We need to do what baseball didn't do," he said, referring to the Major League's inaction regarding the use of steroids by Barry Bonds and other star players. "We need to take responsibility and show the world what we stand for." The MBA officer said he is "passionate" about showing that lenders put the borrowers' interest above their own. "Your customer's best interest is No. 1, ahead of your commission," he told his colleagues. "We need to somehow translate this into something meaningful to the consumer. After 33 years in this industry, I don't know any better litmus test." The final piece of paper, perhaps a one-pager that outlines the chosen loan's pros and cons, is one way to "make it clear that we want consumers to make informed choices," Robbins said. "They can be conservative or not-so-conservatives choices. After all, this is America," he added. "Just as long as they are informed choices." | 
