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Transparency: The Key to Government and Mortgage Lending

Always one to stay abreast of current legislative matters, I wandered on to the GovTrack.us website, which touts the idea that “Trasparency in government is key for a healthy representative democracy.”  Hmm.  Transparency.  That sounds familiar.

Anyway, I decided to search out bills inroduced by the House and Senate about mortgage.  Did you know that 138 mortgage-related bills have been introduced since January of 2007?  (My personal favorite is one sponsored by a high-ranking senator which, at various times and under various names, has included proposed legislation ranging from changing FHA regs to addressing plug-in hybrid cars and the architecture of the Capitol Building.  But I digress.)  I’m quite sure that within days of this post, there will be at least one more bill or addendum or resolution to add to the mix that will somehow espouse the concept of mortgage regulation.

I think that most of us in the industry understand that the industry needs to change.  Unfortunately, some proverbial bad apples got into the mortgage barrel and spoiled it for the ethical and honest brokers who have always sought to offer their clients the best loan programs on the market-and who do so at a fair price.  But putting the mortgage industry under the thumb of the Fed or of Congress isn’t the answer to ridding the industry of bad lending any more than taxing oil companies will lower the price of gas.

The answer is found in three words: transparency in lending.

On April 4, U.S. Senator Kit Bond (R-MO) introduced an amendment to the U.S. Senate housing relief bill that would strengthen loan transparency requirements.  In a press release, bond was quoted as saying, “All borrowers deserve to understand the terms of the loan they are considering and be protected from unknowingly agreeing to future higher payments they cannot afford or prepayment penalties that will trap them in a bad situation,” said Bond.  “My common-sense consumer loan protections will safeguard future families who want their share of the American dream.”

While I will never agree that all of the problems currently faced by those in foreclosure are the exclusive fault of this industry and, in truth, belive most of these machinations by politicians are little more than election year grandstanding, you and I both know that there are homeowners out there who were taken advantage of by less-than-ethical lenders.  Had a transparent mortgage loan system like the soon-to-be-released RateWindow™, borrowers would have had all of the data available so that they could have more informed decision.  And yes, it would have allowed a kind of “common-sense consumer loan protection” referenced by Senator Bond.

We as mortgage lenders and real estate professionals need to step up and be the catalyst for change in our own industry.  True transparency like that available through RateWindow™ will weed out the bad lenders, offer a more level playing field to borrowers and, oh yeah, allow Congress more time to worry about plug-in cars.