There’s no question about what had Washington buzzing the most last week – and that buzz is likely to continue for months.

It was the unveiling of President Obama’s far-reaching plans to reform the U.S. financial regulatory system – including important changes affecting home mortgages and real estate.

Though the plan is aimed mainly at banks, hedge funds, Wall Street and insurance companies , it also focuses on protecting consumers who take out mortgages, credit cards and other forms of debt.

Obama wants to create a new super-department – called the Consumer Financial Protection Agency – that would have the power to review, regulate and even ban loan products considered too risky for the mass market consumption.

It would be able to oversee first and second mortgages marketed by any source – from banks to mortgage companies, credit unions or brokers.

For Realtors, builders and mortgage companies, the new agency would take over a slew of important legal powers. For example, it would become the sole regulator for RESPA – the federal Real Estate Settlement Procedures Act.

That law, administered by HUD since 1974, covers many key aspects of the home buying process – from the upfront “good faith estimates,” or GFE, disclosures to the settlement sheet itself.

Equally important, RESPA bans kickbacks, sets guidelines for title insurers and settlement service providers, and creates complex rules governing all “affiliated businesses” in the real estate, mortgage and title fields.

Under the Obama plan, all this would be shifted from HUD to a new, potentially more aggressive consumer protection agency.

The new department would also get full authority over the Truth in Lending Act from the Federal Reserve Board and the Federal Trade Commission.

It would also be the sole regulator for the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, and the Fair Debt Collections Practices Act – all of which are now in other agencies’ bailiwicks.

The White House white paper covering the plan said the new agency “should give consumer protection an independent seat at the table in our financial regulatory system.”

Though real estate and mortgage trade groups generally made muted comments on the Obama plans, bankers came out swinging.

Edward Yingling of the American Bankers Association said his members “are dumfounded by the scope” of the consumer protection agency – creating a whole new layer of oversight and bureaucracy.

“It’s not like the current regulators don’t (already ) have all the authority they need,” he said.

K. Harney

This entry was posted on Monday, June 22nd, 2009 at 8:38 am and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.