Finance, Home Lending- Federal Trade Commission Staff Comment for the Federal Home Loan Mortgage Corporation

Federal Trade Commission

Description

UNITED STATES OF AMERICAFEDERAL TRADE COMMISSIONWASHINGTON, D.C. 20580Office of Policy PlanningBureau of EconomicsApril 30, 2008Home Valuation Code of Conduct ResponseAttn: Senior Vice President, Credit Risk OversightFreddie Mac1551 Park Run Drive, Mail Stop D2ZMcLean, VA 22102-3110Re: Home Valuation Code of ConductDear Senior Vice President, Credit Risk Oversight:On March 14, 2008, Federal Home Loan Mortgage Corporation (“Freddie Mac”)announced that it is seeking comments on the Home Valuation Code of Conduct (“Code ofConduct”) that Freddie Mac proposes to adopt pursuant to a settlement agreement with the New1York Attorney General (“NY AG”). Staff of the Federal Trade Commission’s Office of PolicyPlanning and Bureau of Economics appreciates the opportunity to file this comment on the2potential effects on competition and consumers of the Code of Conduct.Given the recent problems in the mortgage lending marketplace, the FTC staff generallysupports efforts to improve the lending process for consumers and, in particular, supportsproposals such as those contained in the Code of Conduct to protect the independence ofappraisals. The following comments on the proposed Code of Conduct are based on the staff’sconsumer protection experience in the mortgage market and its research on consumer mortgage1Press Release, Freddie Mac, Freddie Mac Seeks Mortgage Industry Comments on NewAppraisal Code of Conduct (Mar. 14, 2008), available athttp://www ...

Informations

• Publié par: Phuwyug
• Nombre de lectures: 50
• Langue: English

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April 30, 2008

Home Valuation Code of Conduct Response

Attn: Senior Vice President, Credit Risk Oversight

Freddie Mac

1551 Park Run Drive, Mail Stop D2Z

McLean, VA

22102-3110

Re:

Home Valuation Code of Conduct

Dear Senior Vice President, Credit Risk Oversight:

On March 14, 2008, Federal Home Loan Mortgage Corporation (“Freddie Mac”)

announced that it is seeking comments on the Home Valuation Code of Conduct (“Code of

Conduct”) that Freddie Mac proposes to adopt pursuant to a settlement agreement with the New

York Attorney General (“NY AG”).

Staff of the Federal Trade Commission’s Office of Policy

1

Planning and Bureau of Economics appreciates the opportunity to file this comment on the

potential effects on competition and consumers of the Code of Conduct.

2

Given the recent problems in the mortgage lending marketplace, the FTC staff generally

supports efforts to improve the lending process for consumers and, in particular, supports

proposals such as those contained in the Code of Conduct to protect the independence of

appraisals.

The following comments on the proposed Code of Conduct are based on the staff’s

consumer protection experience in the mortgage market and its research on consumer mortgage

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disclosures, as well as its competition experience in the real estate and other industries.

Section I

summarizes FTC law enforcement and other activities addressing unfair or deceptive practices in

the mortgage lending market.

Section II provides a brief discussion of the role of appraisals in

the mortgage lending process.

Section III identifies the relevant provisions in the proposed Code

of Conduct on which this comment focuses.

Section IV explains how these provisions raise

potential concerns regarding their ultimate impact on competition and consumers in the

mortgage lending market.

I.

FTC Law Enforcement and Other Activities in Response to Unfair or Deceptive

Practices in the Mortgage Lending Market

As the primary federal agency that enforces consumer credit laws with respect to non-

depository institutions, the Commission has wide-ranging responsibility regarding consumer

financial issues in the mortgage market, including those involving mortgage lenders, brokers,

and servicers.

The FTC, along with other agencies, enforces a number of federal laws governing

mortgage lending, including the Truth in Lending Act (“TILA”) and the Home Ownership and

3

Equity Protection Act (“HOEPA”).

The Commission also enforces Section 5 of the Federal

4

Trade Commission Act (“FTC Act”), which more generally prohibits unfair or deceptive acts

and practices in the marketplace.

In addition, the Commission conducts research on mortgage

5

lending and related topics, develops consumer and business education materials, responds to

6

inquiries about these matters from consumers, industry and the media, and works with other

federal and state law enforcement entities to protect consumers from unfair or deceptive

mortgage lending and servicing practices.

The Commission’s law enforcement actions have targeted deception and other illegal

practices in the mortgage market, focusing in particular on the subprime market.

In recent years,

the agency has brought 22 actions against companies and principals in the mortgage lending

industry, involving companies large and small in various regions of the country.

Several of

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these cases have resulted in large monetary judgments, collectively returning more than $320

million to consumers.

These enforcement actions have targeted deceptive or unfair practices in

all stages of mortgage lending – from advertising and marketing through loan servicing – by

mortgage lenders, brokers, and loan servicers.

In addition to pursuing numerous law enforcement actions in the mortgage lending

market, Commission staff also has conducted research on mortgage lending issues, including

two recent studies of consumer mortgage disclosures.

The studies were conducted, in part,

8

because the Commission’s law enforcement experience has demonstrated that current mortgage

disclosures are often ineffective in preventing deception.

This research builds on the FTC staff’s

substantial experience evaluating the role of consumer information and disclosures in a wide

variety of markets.

The insights from the Commission’s law enforcement experience and

research informs the FTC staff’s view of the proposed Code of Conduct.

II.

Appraisals in the Mortgage Lending Process

Retail mortgage lenders, correspondent lenders, and brokers compete with each other to