NAMB and NHEMA have different view points about bad credit home loan sub-prime lending, which NAMB considers 'predatory lending'. Below are their opinions:

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NAMB

NAMB President Harry Dinham testified it will require a group effort by government, the mortgage industry and consumers to address the continuing issue of home loan predatory lending. 

In his testimony before the Federal Reserve Board in Atlanta, Dinham said, "Unfortunately, many industry critics have blamed all the problems that consumers face with the current shopping process, products offered and disclosure issues on the industry alone. In so doing, they simply ignore the vital role that government and consumers have throughout the loan origination process."

During the hearing, Dinham outlined his thoughts on the role of the three segments in addressing predatory lending. 


Government: Dinham said that the country has seen a great expansion in the mortgage finance industry over the past few years adding robust competition and expanded product choice. However, this has also led to a corresponding rise in the number of uneducated and unlicensed brokers. 

He noted that while states are increasing requirements for brokers, they continue to exempt officers of banks and lenders from meeting license requirements. He said that licensing is important because while most consumers don?t know the difference between a banker and a broker, they need to have the assurance that they are using an educated originator no matter which lending channel they choose. 

Providing licensure requirements for every originator including a criminal background check to weed out bad actors is a vital role that government plays in protecting consumers according to Dinham. 

In addition, Dinham noted that government must also work with industry and the consumer community to improve price and fee disclosure. 

"The truth is, all originator types ? brokers, bankers, lenders, credit unions and other all receive direct compensation, indirect compensation or a combination of both. Unfortunately, only brokers disclose all fees and costs to the consumer. This must change," said Dinham. 

Industry: Industry must remain innovative and knowledgeable about its business and follow a strict ethical framework that is enforced within the business community. 

He noted that NAMB members are required to follow a strict code of ethics, and that the association is developing a grievance process for customers to follow if they feel they have been wronged in the mortgage process. 

Dinham noted that every originator needs to make sure that it?s potential customer receives transparent information about the loan they are seeking so the consumer can make the most informed decision possible. 

Consumer: Finally, he noted that consumer education is the long-term key to addressing many of the predatory lending issues that people face today. 

He advocated early financial literacy education and the allocation of real dollars to make this a reality. 

"I believe if we all take part in this process we can be successful at eliminating predatory lending practices," said Dinham. "The measures that I testified about today are careful to accomplish this goal without robbing this innovative and dynamic industry of the ability to remain a free and capitalistic market that has brought affordable credit to more social and economic classes than ever before in the history of our consumer credit system."
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NHEMA

NHEMA says state anti-predatory lending laws hurt many consumers.

The Washington Counsel for the National Home Equity Mortgage Association (NHEMA) said the existing patchwork of differing state anti-predatory lending laws often prevents consumers - particularly those who have traditionally been underserved by financial institutions - from obtaining affordable home equity loans.

"NHEMA believes that policy makers must take great care to ensure that legislative and regulatory changes do not result in unnecessary or unintended adverse impacts on this critically important nonprime segment of the mortgage market," said Wright H. Andrews, NHEMA Washington Counsel, in written testimony. "Disrupting or impeding nonprime lending would have serious negative effects on our economy and borrowers' ability to obtain homes and meet their credit needs." 

Nonprime lending now amounts to about 25 percent of the overall mortgage market. Forty percent of these nonprime loans in 2005 were made for home purchases, showing how vital nonprime lending is to helping people achieve the American dream of home-ownership. 

Andrews appeared at a public Federal Reserve Board hearing on the home equity lending market, the first of four such hearings scheduled for this summer. 

According to Andrews' testimony, in some cases, state laws have had positive effects, but have hurt consumers in other ways. "In many cases, these laws contain negative aspects as well, such as limiting loan affordability and access to credit for many high-risk borrowers," said Andrews.

Andrews noted that most of the so-called "tougher" state anti-predatory lending laws have caused lenders to stop offering flexible financing features that make loans more affordable for nonprime borrowers, resulting in many people not being able to obtain the loan they need. In addition, these laws have caused lenders to cease making "high-cost" loans entirely due to the increased perception of legal and reputational risks on the part of major nonprime lenders. 

Andrews also called for uniform Federal mortgage lending standards, saying that state anti-predatory lending laws are "uneven" and often do not provide true and balanced protection for borrowers. For example, state laws do not help many borrowers because their loans are made by a federally chartered depository, which is exempt from state requirements.

"Uniform Federal standards would greatly reduce compliance costs, allowing lenders to pass on savings to borrowers by offering lower rates," said Andrews. "National standards would also provide all borrowers, regardless of where they live or whether they borrow, from a federally chartered or state regulated lender with equal and effective protection against abusive practices."

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