Acting to prevent the mortgage industry from "gutting" the only consumer protection laws governing home loan transactions, 13 consumer and community groups have asked the leadership of the Senate Banking Committee to go slowly when it addresses the issue later this year.

The "massive modifications" of the Truth in Lending Act (TIL) and the Real Estate Settlement Procedures Act (RESPA) that are being proposed "under the guise of reform...would reduce consumer and civil rights safeguards without providing any additional information or protections," the organizations said in a letter to Chairman Phil Gramm, R-Texas, and ranking minority member Paul Sarbanes, D-Md.

Revisions to TILA and RESPA have been on the table on Capital Hill for years. But with a new regime in the White House, the housing finance business is hoping significant progress will finally be made.

TILA requires lenders to disclose their fees and charges, and to calculate an annual percentage rate so borrowers can more easily compare the total cost of one loan vs. another. RESPA is an anti-kickback law that makes it illegal for lenders to pay for so-called "naked referrals," sending business to a lender for a fee and without other work.

Basically, lenders hope to replace the two laws, which they maintain are outmoded and unworkable, with a more meaningful, easily understandable system in which all loan costs are bundled into a single guaranteed amount. And they hope to make headway by tying their effort to federal lawmakers' desire to curb abusive lending practices, arguing that the best way to stop scam artists from fleecing unsuspecting borrowers is to make it easier to compare loan costs.

But without TILA and RESPA, the 13 groups said, there would be no federal or state laws protecting consumers in their mortgage transactions. The two laws may not be perfect, said the groups, which include the influential Consumers Union and Consumers Federation of America, but they are all we have.

"There are no federal or state laws that govern the maximum rates or fees that lenders charge," they pointed out. And states "cannot set limits on the terms lenders impose.

"Other than prohibitions against discrimination in the granting of credit, (TILA and RESPA) are generally the only laws on a federal or state level that require consumer protections in the making of home loans. These two laws are thus the only significant way in which Congress has ensured that the needs of home owners are somewhat protected and balanced against the interests of the lending industry."

The groups also argued that the failures in the current system which allow predatory lenders to get away with, among other things, packing their loans with excessive fees, lies not in the basic framework of TILA and RESPA but in the "lack of substantive regulation in home lending transactions."

As the 13 organizations see it, lawmakers face "two distinct but related" issues: * If TILA and RESPA are revised, changes must provide for more safeguards and enforcement mechanisms, not fewer.

Preventing abusive lending practices should not be used as an excuse for "gutting" the basic laws governing home loans, they say.

Besides CU and CFA, the groups signing the letter to Sens. Gramm and Sarbanes and other committee members include: ACORN, the Coalition for Responsible Lending, Leadership Conference on Civil Rights, National Community Reinvestment Coalition, National People's Action, U.S. Public Interest Research Group. Center for Community Change, National Association of Consumer Advocates, National Consumer Law Center, Self-Help Credit Union and the International Union of Auto Workers.

For more articles by Lew Sichelman, please press here.

Published: February 5, 2001

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.