E. Robert Levy, the mortgage industry's top lobbyist in New Jersey, has been talking lately about the need to simplify disclosures given to consumers on the terms and conditions of loans.
He also came out recently in favor of state licensing and education requirements for loan solicitors, even though that would likely increase operating costs for the lenders he represents.
Levy, who is executive director and counsel for the Mortgage Bankers Association of New Jersey and the New Jersey Association of Mortgage Brokers, is hoping to get out in front of the subprime-lending issue.
Lawmakers are considering legislation that could restrict lender access to what has been a lucrative market: high-risk borrowers with shaky credit histories and high levels of debt. So Levy has been traveling between Washington, D.C., and Trenton in recent days to make sure the concerns of New Jersey mortgage bankers and brokers are heard.
It's expected that the stated-income loans [which do not require borrowers to provide pay stubs, tax documents or other proof of income], the low-documentation and no-documentation loans, the payment-option ARMs [adjustable-rate mortgages] with negative amortization and the interest-only loans, will likely be the ones that were problematic.
Then you have the mortgages that were closed with the borrower qualified at the initial teaser rates, and when the rates adjusted upward, borrowers were not prepared to make higher payments.
Obviously it's a problem we don't want to see occur again. But the point has to be made that 85 percent or more of the subprime borrowers are paying according to their terms.
The stated-income loans are subject to abuse and the industry is going to rethink whether that loan product is continued. Some of the problems came from customers giving inaccurate information which is, in essence, mortgage fraud.
Q. Congress is considering requiring lenders to qualify borrowers who apply for certain adjustable-rate loans based on the long-term repayment costs, not just teaser rates. Do you support that?
If you are going to make that decision, it depends on whether you want to increase homeownership or decide that some consumers should not get loans.
I think disclosures are not working as well as they should. We provide way too much paperwork to consumers who do not fully comprehend the nature of the loans.
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