In a letter to the Federal Reserve, the coalition requests the withdrawal of the proposed regulations under the Truth in Lending Act (Regulation Z). The coalition warns that under Regulation Z, lenders would be encouraged to make false advertising claims regarding reverse mortgages while being allowed to sell senior citizens ‘harmful or unnecessary financial products after a 10-day waiting period.’ The coalition also claims that the proposal would ‘open the door for a harmful new type of reverse mortgage where borrowers could owe much more than the home is worth.’
Furthermore, the letter to the Federal Reserve states that the proposed regulation undermines the tenets of the new Consumer Financial Protection Bureau, which is empowered under the Dodd-Frank Act to study reverse mortgages and issue regulations based on its findings. Another concern that was raised involves the ‘right of rescission,’ which provides homeowners up to three years to refinance or restructure a mortgage if a lender made the loan without providing timely and accurate disclosures about the loan's terms and conditions. The coalition says that the definition of ‘accurate’ disclosures would be ‘relaxed’ under the new proposals, thus encouraging new predatory lending practices.
The coalition consists of the Center for Responsible Lending, the National Consumer Law Center, the National Association of Consumer Advocates, the California Reinvestment Coalition, the National Fair Housing Alliance, Consumers Union, Consumer Action, the Neighborhood Economic Development Advocacy Project and the National Community Reinvestment Coalition.
SOURCE: Center for Responsible Lending