Congress Mulls New Safeguards for Mortgagees : Lending: Bills would mandate warnings on high-rate notes and require interest payments on impound accounts.

Banking interests and consumer groups squared off in Washington on Wednesday over two bills in Congress intended to give more protection to borrowers.

One of the bills would require “warning labels” on high-rate loans that could lead to foreclosure. The other would force mortgage lenders to pay interest on money they withhold to pay property taxes and other expenses.

Both proposals were discussed in hearings Wednesday.

The first is a bipartisan bill that drew the support of the Clinton Administration on Wednesday. It is opposed by several lenders and banking trade groups, and has raised some concerns that were voiced by a Federal Reserve official, who said it could put a damper on mortgage-lending and add to institutions’ regulatory costs.

The measure, jointly introduced by the senior Democrat and Republican on the Senate Banking Committee, would give borrowers more protection against high-interest second mortgages and force lenders to spell out terms of such loans in plain language.

It is primarily designed to protect low-income or unsophisticated borrowers from finance companies and other lenders that specialize in home-equity loans--sometimes at annual rates exceeding 25%--that have a greater tendency to wind up in foreclosure.

“This bill would get rid of most of the predatory practices that some lenders engage in, but there’d still be a lot of loan sharks in the water,” said Michelle Meier of Consumers Union, the Washington-based group that publishes Consumer Reports magazine.

The proposal drew fire from some bankers Wednesday, and the Comptroller of the Currency, who regulates national banks, admitted that the Administration’s support of the measure is tempered by concern that it could raise regulatory costs for lenders.

The second proposal, which died quietly last year and was recently reintroduced by Banking Committee Chairman Henry Gonzalez (D-Tex.), seemed to face a more difficult road.

The wide-ranging bill would put strict curbs on lenders that require borrowers to set up “impound,” or escrow, accounts. In a typical impound arrangement, the borrower each month pays the equivalent of about 1/12 of a year’s property tax or insurance premium, and the lender pays those bills out of the account when they come due.

California law requires most lenders to pay 2% annual interest on money held in impound accounts, but most states require no payment of interest.

Gonzalez’s bill would require most lenders across the country to pay a standard savings-account interest rate on impound accounts. It would also allow borrowers to drop the accounts and pay their own insurance and tax bills once they have a 20% equity stake in the house.

Steven Ashley, a lender and executive with the Mortgage Bankers Assn. of America, told the panel that the measure would raise lenders’ costs. Those costs would eventually be passed on to consumers through higher rates or larger set-up fees, Ashley said.

Ashley said the proposal would yield only about $21 a year in interest income for a borrower with a $100,000 mortgage, while a lender would have to charge an additional $224 when the loan was first taken out to cover the cost of complying with the rule.