Mortgage bankers group chief cautions against excessive rules

The head of a mortgage bankers group warned Tuesday against excessive regulation in response to the sub-prime mortgage crisis, saying an overreaction could prevent millions of Americans from buying homes.

“We don’t want to revert to a time when, without perfect credit, you couldn’t buy a home,” said John Robbins, chairman of the Mortgage Bankers Assn.

“Yet regulatory or legislative overreaction could prompt a return to just that -- to raise the bar,” Robbins said in a speech at the National Press Club in Washington.

U.S. lawmakers are considering legislation to address the recent problems in the sub-prime mortgage industry, which provides loans to borrowers with poor credit histories. Lenders are struggling with rising defaults as many loans reset at higher interest rates and U.S. home prices stagnate.

U.S. banking regulators are trying to put final touches on guidelines for how the industry should deal with adjustable-rate mortgages, including ones such as the “2/28” loan, in which the interest rate resets after two years and remains adjustable for 28 years.

“What we hope is that they take a realistic view and allow the industry to deal with the issue,” Robbins said.

Consumers advocates, however, are pushing for new laws to better shield borrowers and rein in a largely unregulated mortgage industry.

“We appreciate the industry’s stated intentions, but they guarantee nothing,” said John Taylor, chairman and chief executive of the National Community Reinvestment Coalition. “We must reject any superficial, tinkering-around-the-edges approach from an industry that has yet to take responsibility for a foreclosure crisis, which they have described as simply a ‘market correction.’ ”

In his speech, Robbins lamented how “a few unethical actors” have sullied his profession’s reputation, laying blame at the feet of mortgage brokers.

“Who made this mess?” Robbins asked. “The short-term folks. People who get a commission when the deal happens. For them, it’s the number of loans that counts. Good loan? Bad loan? Who cares? For them it’s all about their commission.”

Robbins called for a national licensing system for mortgage brokers, which he said would help weed out “scam artists.”

In response, Harry Dinham, president of the National Assn. of Mortgage Brokers, said: “It is truly unfortunate [Robbins] has attempted to shift blame away from Wall Street, federally chartered banks, state-chartered lenders and underwriters for the sub-prime situation we find ourselves in today.”