Uniform Disclosure Rules Urged for Housing Loans

Ray Spinelli, president of the 103,000-member California Assn. of Realtors, said he hopes the Federal Reserve Board or Congress this year will impose uniform disclosure requirements on mortgage lending institutions that would help home buyers sort through the myriad of adjustable-rate mortgages on the market.

Confusion has been caused by the hundreds of loan variations that banks and savings and loans have created in the last five years as rising interest rates have rendered traditional fixed-rate mortgages unaffordable to many.

Spinelli, in a meeting with Orange County Realtors Wednesday, said CAR wants lenders to clearly explain to home buyers the effect of adjustable mortgage rates on their monthly payments “six months down the road,” or whenever the rates are first scheduled to be adjusted upward.

Reducing ‘Teaser’ Rates

He said lenders “have come a long way” in recent months by reducing the use of “teaser interest rates” that increase dramatically after a short time. But he complained that the kind of information made available to consumers varies widely among loan programs and is often insufficient.

Joel Singer, CAR’s chief economist, said that for 18 months, CAR and the National Assn. of Realtors have appealed to lenders to enforce stricter disclosure standards on their industry, but so far the lenders have not responded.

More recently, he said, the real estate associations asked the Federal Reserve Board to establish and enforce guidelines on the lenders.

As a last resort, Singer said, CAR, through the national organization, would push for federal legislation to police the lending industry on disclosure.

Spinelli said that last February, CAR officials met with California’s 32-member congressional delegation in Washington to argue for uniform lending disclosure requirements.

In addition, Spinelli said, CAR urged the congressmen to reduce a proposed hike in interest rates that sellers must charge to home buyers on carry-back loans and to oppose raising the fees that home buyers must pay for Federal Housing Authority and Veterans Administration mortgages.

Spinelli said he does not believe Congress will take action this year on proposals for a “flat tax” that would remove tax incentives for real estate investors.

In any case, he said, the proposals would not have a major effect on the real estate industry because it would not remove mortgage interest write-offs on owner-occupied homes, which he said constitute about 85% of the market.