| Title: | New MBA Policy Paper: Suitability Would Turn Back the Clock on Fair Lending and Homeownership Gains |
| Source: | MBA |
| Date: | 1/29/2007 |
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WASHINGTON , DC (January 17, 2007) — The Mortgage Bankers Association (MBA) today released a new policy paper examining the effects that
imposing a suitability standard on mortgage lenders would have on consumers. The paper concludes that a law requiring mortgage
lenders to subjectively evaluate whether a loan product is best suited for a borrower would limit the availability of credit
and increase the cost to consumers.
“Making the lender responsible for determining which loan is suitable for a borrower will limit consumer choice and could
deepen the slowdown in the housing market,” said Kurt Pfotenhauer, MBA’s Senior Vice President of Government Affairs. “After
25 years of the industry developing increasingly sophisticated and objective underwriting standards, a suitability standard
would turn back the clock on fairness in lending by virtually requiring lender subjectivity in the lending decision.”
While a specific proposal for a suitability standard does not yet exist, the MBA policy paper is intended to develop a thoughtful
and meaningful dialogue on an issue that – if legislated – would have severe unintended consequences. Most discussions about
suitability propose more rigid, prescribed underwriting standards, a subjective evaluation of whether a loan is suitable for
the borrower, establishment of a fiduciary obligation by the lender to the borrower, and a private right of action to address
any violations.
“The lender is obligated to determine that a borrower will repay their loan before the lender extends the loan,” continued
Pfotenhauer. “The borrower, however, is best qualified to determine whether a loan that he qualifies for is suitable. To
legally obligate the lender to determine suitability would limit credit to all but the most financially secure Americans.”
The policy paper concludes that Congress should resist pressure to enact a suitability standard and should instead focus on
establishing clear, objective restrictions – including a uniform national lending standard – to stop lending abuses without
impeding the market and its ability to innovate to benefit consumers.
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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry
that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the
association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand
homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and
fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety
of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies,
mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending
field. For additional information, visit MBA's Web site: www.mortgagebankers.org.