<p>WASHINGTON – Re. John LaFalce (D-N.Y.), the ranking Democrat on the House Financial Services Committee introduced legislation that would simplify the mortgage loan process and impose stiff penalities on lenders who violate consumer protection laws and fail to provide required federal disclosures, "correcting a flaw in the current statute," LaFalce's office said. "The Mortgage Loan Consumer Protection Act" – H.R. 4818 – is intended to reform the Real Estate Settlement Procedures Act (RESPA), enacted in 1974, which governs mortgage loan disclosures and the treatment of escrow accounts.LaFalce said the measure "would help borrowers navigate the complicated mortgage loan process by simplifying and improving loan disclosures, addressing the growing problem of junk fees and markups, and strengthening the enforcement of mortgage consumer protection laws." A number of consumer groups, including Consumers Union, Consumer Federation of America, the National Consumer Law Center, and the National Association of Consumer Advocates, have announced their support for The Mortgage Loan Consumer Protection Act. In introducing H.R. 4818, LaFalce recognized that, "The majority of mortgage lenders, brokers, and settlement service providers do a commendable job in helping borrowers through the mortgage loan process, and in providing a good mortgage product." But, he pointed out, ". by loan closing, too many borrowers conclude that the mortgage process is far too confusing than it needs to be. And, too many borrowers close mortgage loans without any clear sense of whether their fees and rates are truly competitive." Among the provisions of The Mortgage Loan Consumer Protection Act, it: </p> <p>requires lenders to disclose loan terms prior to a mortgage closing. </p> <p>directs HUD to "harmonize" the terms and forms used in the HUD-1 Statement and the Good Faith Estimate (GFE). This, said LaFalce, will allow borrowers to track costs throughout the loan process. </p> <p>revises the Truth In Lending Act (TILA) to improve the accuracy of the "Finance Charge" for the purpose of calculating the APR for a mortgage loan. </p> <p>expands protections for borrowers against unwarranted mortgage closing costs, including markups and junk fees. Lenders would be required to make available to the borrowers the HUD-1 Settlement Statement at least two calendar days before closing. This, said LaFalce, would give borrowers an opportunity to challenge fees and charges, "at a time in the process when they can be reasonably challenged." </p> <p>amends RESPA to require that all fees collected by a lender be disclosed clearly on the HUD-1 as being collected by the lender. This provision, said LaFalce, provides additional protections against the practice of disguising markups by rolling them into a single disclosure item. </p> <p>addresses the problem of junk fees – fees collected by one settlement service provider where "no, nominal, or duplicative" work is done. These types of fees would be prohibited. </p> <p>makes loan servicers liable for fees and penalties caused by the servicers' failure to make timely payment of taxes, insurance premiums, and other charges. It also prohibits the servicer from profiting from the failure to make timely payment of insurance charges. requires the lender to return all escrow funds at the time of the loan repayment, provided the borrower gives seven calendar days notice of their intent to prepay. If notice is not given, the servicer must return escrow funds within 21 days. Monetary damanges are provided for failure to comply with this requirement. directs HUD to expand the Special Information Booklet all borrowers are required to receive at the same time the Good Faith Estimate is provide. The bill would also give borrowers the ability to sue lenders over RESPA violations, and allow them to recover "actual damages; additional damages as the court may award up to $2,000 per loan; and court costs, in the case of a successful action for damages." LaFalce said The Mortgage Loan Consumer Protection Act is intended to complement the predatory lending legislation he introduced last year (H.R. 1051) and the yield premium proposal outlined in his recent letter to HUD Secretary Mel Martinez addressing RESPA issues. -</p> <p>[email protected]</p>