| OTS Bumps Deadline
Prepayment & late fee rules implementation moved to July 1 December 9, 2002 By CHRISTY ROBINSON |
| After urging the federal government to delay deregulation of prepayment and late fee rules because the short notice would cause a major disruption in lending, the National Home Equity Mortgage Association (NHEMA) got its wish Friday.
NHEMA general counsel Maury Shevin said the Office of Thrift Supervision (OTS) contacted the subprime lending association and said the implementation deadline has been pushed to July 1 instead of Jan. 1. “Lenders simply have not had the time to learn about and comply with all the differences in regulation,” Shevin said in an announcement. Lenders were working frantically to meet the implementation date, but many of them reported that they wouldn’t be able to meet it. Even under the best of circumstances, adapting to all the different policies and approaches after deregulation would have be a logistical challenge, according to the NHEMA announcement. The six-month extension helps avoid a chaotic situation in the beginning of the year. “We’re very glad the OTS agreed with our position,” Shevin said. The OTS announced in late September that prepayment and late fee rules will be removed from the list of agency regulations that apply to state housing creditors under the Alternative Mortgage Transaction Parity Act, effective Jan.1. Those consumer options have been regulated by the federal government until now. The Parity Act, passed in 1982, grants state-chartered housing creditors equality with federally-chartered lenders when making alternative mortgages, such as adjustable rate mortgages loans, by permitting them to follow OTS rules. A total of 43 states and the District of Columbia have already enacted their own regulations that differ from the federal rules, and some states have separate rules for different types of loans, NHEMA said. Currently, major regional and national lenders work under the single set of federal regulations. After deregulation, lenders would have had to learn about and comply with about 65 different sets of regulations and overhaul lending systems, all by Jan. 1. There also could be as many as 50 different regulatory policies in different states. “After reviewing how the parity rules affect the ability of state housing creditors to make alternative mortgages, OTS determined that the provisions dealing with prepayment penalties and late fees were not essential to making alternative mortgages,” said OTS director James E. Gilleran said in September. “Therefore, it is not necessary to continue to identify these provisions as applying to these loans. He also said data indicated that including late fees and prepayment penalty provisions may have allowed some state mortgage lenders to engage in lending practices outside of state consumer protection laws. However, while consumer protections did spark the change, the agency doesn’t believe lending abuses are occurring at the federal level, said OTS chief counsel Carolyn Buck in a Dow Jones Newswires interview. The OTS, run by the U.S. Department of the Treasury, regulates all federally chartered and many state-chartered thrift institutions, which include savings banks and savings and loan associations. Not subject to the Parity Act, federally chartered thrifts are supervised by OTS and would continue to follow OTS rules. |
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Christy Robinson is the editor of MortgageDaily.com. She received a bachelor’s degree in news-editorial journalism from The University of Texas at Arlington. Her work has previously been published in The Dallas Morning News. email Christy at: ChristyRobinson@MortgageDaily.com |
