Realtors® Call For Responsible Lending Policies With Increased Consumer Protection

WASHINGTON, June 26, 2007

The National Association of Realtors® testified today that abusive lending problems are national problems and require solutions that afford the homebuyer greater protection. NAR noted that irresponsible and abusive lending, and “problematic” loans, are disastrous not only to borrowers and their family but also to the community, and to the economic strength of those and surrounding communities.

“As we sit here today, my home state of Michigan has one of the highest foreclosure rates in America. I can tell you from personal experience that when families lose homes to foreclosure, our communities, the housing market and our local and national economies all suffer,” Pat V. Combs, NAR president, said before the Senate Subcommittee on Housing, Transportation and Community Development.

“Realtors® support making fair and affordable mortgage products available for those with less than perfect credit. At the same time, we believe such loans should only be made when it is clear that the borrower can afford to repay it. Responsible lending principles, such as those developed by NAR, need to be implemented to curb predatory lending and to rein in abusive lenders. NAR will continue to work with Congress to address the problems created by irresponsible lending practices,” said Combs.

NAR’s responsible lending policy calls for stronger underwriting standards, for all mortgage originators to act in “good faith and with fair dealings,” and provide flexibility for unique life circumstances. NAR also pledged support for legislative, regulatory and private-sector foreclosure avoidance and mitigation efforts, and increased funding for programs that provide financial assistance, counseling and consumer education to help borrowers make good decisions.

“We also believe that the penalties for abusive acts should be stronger including criminal and civil penalties,” Combs said. She also reinforced the Realtors®’ desire to see FHA modernization to make “the FHA mortgage insurance program a viable alternative to subprime borrowers, both for first-time buyers and those looking to refinance into a more affordable loan.”

NAR continues to be a strong supporter of consumer protection and consumer rights. In addition to other protective policies and legislation, NAR reiterated its stand on eliminating the Mortgage Cancellation Tax, often referred to as the “phantom tax” that requires income tax be paid on some portion of a forgiven loan after a short sale or a foreclosure. NAR has also recommended that the independence of home appraisers should be strengthened to ensure that appraisals are based on “sound, fair and accurate appraisal principles that reflect the property’s true value.”

The Realtors® pledged their continued efforts to work with Congress to enact consumer protection policies, to eliminate the phantom tax and to pass FHA reform.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
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