Heated Debate Continues Over Real Estate Regulation Bill

Hearings and debate continued almost non-stop last week on Capitol Hill as House leaders pushed controversial legislation to create a Consumer Financial Protection Agency with far-reaching powers affecting mortgages and real estate.

Though details of the legislation may change as it transits through the House and Senate, the proposed new agency almost certainly would play a huge role in housing finance, touching all home buyers, sellers, Realtors and lenders.

Here are just a few of the areas it's likely to oversee:

First, it would have primary federal regulatory oversight of all mortgage products offered nationwide -- that includes banks, mortgage brokers, mortgage companies, credit unions and most private lenders.

Very likely the agency would identify a limited number of mortgage types it considers standard and relatively safe for consumers, such as 30-year fixed rate mortgages with mandatory full documentation and strict underwriting, and FHA and VA loans.

All other non-standard loans, especially those with variable payments, less than full documentation or fluctuating interest charges, would be subject to extra regulatory attention.

The agency also is likely to take over a number of consumer regulatory powers that are currently with other federal agencies. They include the Real Estate Settlement Procedures Act, which covers all aspects of home closings, good faith estimates and bans kickbacks, PLUS the Truth in Lending Act, and the Equal Credit Opportunities Act.

Proponents of the bill believe a new agency is needed to prevent a reoccurrence of the severe damage done to home owners, buyers, mortgage borrowers by the sort of lax regulatory oversight of mortgage products that led to the mortgage meltdown and housing bust.

However, banking and mortgage industry trade groups warned that this legislation could do more harm than good and stifle innovation. Those that oppose this bill are concerned about the costs of creating and running a new overseer of mortgage products and credit cards.

For information about real estate in your area and on finding the right financing fell free to contact bill.swanson@cbshome.com.