There has been a lot of pressure put on the Federal Reserve to not go ahead with their policy change when it comes to mortgage lending. Consumer advocacy groups and federal lawmakers are united in opposition to revising the law that allows foreclosures to be halted if the lender violated the Truth-in-Lending Act (TILA). This law, which allows borrowers up to 3 years to prove to a court that the lender did not properly disclose the terms of the loan, has been on the books for more than 40 years.
The change that’s being considered would require homeowners to pay off the mortgage before the creditor must cancel its security interest in the home. This would make it far more difficult for borrowers to enforce their rights under TILA. And at a time when many lenders are coming under fire for their lending practices which created the current crisis, the timing of such a move is just completely out of place. It basically amounts to having less oversight and accountability from lenders.
Senators and advocacy groups are pushing the Fed to hold off on any major changes to the law, at least until the rights of the borrower are further strengthened and protected. More than 200 lawyers representing homeowners in foreclosure cases across the country have petitioned the Federal Reserve to reconsider their decision. So far, they haven’t received an answer.
This seems to be basically an image battle. All of the shouting from the defense of the homeowners makes a big deal out of the timing of this change. Whether borrowers need this protection in foreclosure cases isn’t being debated, merely the fact that everyone knows we need more oversight of the housing industry.
What are your thoughts on this? Do you think the Fed should postpone or abandon this rule change altogether? Or do homeowners currently enjoy enough legal protection that this change won’t really be felt? And how can we cut the rhetoric in Washington and get the down-to-earth homeowner’s situation to be heard?