Alert
Close

Join the Drive to End Hunger! Watch the NASCAR race on Sunday at Kansas Speedway.

HIGHLIGHTS

Open
Grocery Coupons

Grocery Coupons

Members can print free savings coupons

Brain Health Center

Brain Health Center

Learn how to live smart and stay sharp

Amazon Kindle

Amazon Kindle

Members save on e-
readers and tablets

Caring for loved ones?

Caring for loved ones?

Find the resources you need

AARP Calls for Withdrawal of Fed’s Proposed Truth-in-Lending Regulations

For Immediate Release

Contact: Media Relations

November 30, 2010

202-434-2560

Media@aarp.org


AARP CALLS FOR WITHDRAWAL OF FED’S PROPOSED TRUTH-IN-LENDING REGULATIONS

Proposed TILA Revisions Greatly Undermine Consumer Protections, Break with Congressional Intent, AARP Says

WASHINGTON, DC – In a letter to the Fed Board of Governors, AARP Legislative Policy Director David Certner strongly criticized changes relating to reverse mortgages and right of rescission in the Fed’s proposed revisions to the Truth-In-Lending Act (TILA).  Certner also urged the Federal Reserve to withdraw its proposal and defer discussion of changes to TILA until next year by the new Consumer Financial Protection Bureau.  Full text of the letter can be found after the following excerpts.  The following quotes are from David Certner:


“While some proposed changes to TILA . . . will certainly benefit consumers, two provisions, in our view, would have such severe consequences for our members that we believe it prudent to withdraw the entire proposal.”

“Not only would those two provisions greatly undermine existing consumer protections, they break with Congressional intent and exceed the authority given to the Board.”

“In the past few years, we have witnessed a housing crisis filled with too many personal tragedies brought about by inadequate consumer safeguards.  Because of the serious potential harm the above-mentioned provisions could also cause our members and consumers generally, AARP strongly urges the Board to withdraw FRB Docket R-1390 and to permit a broader discussion of these and other changes to TILA next year by the Consumer Financial Protection Bureau.”

RE: disclosure requirements for reverse mortgages:

“Unfortunately, this prohibition includes a safe harbor provision that deems transactions to be in compliance if the purchase of such financial products occurs at least 10 calendar days after the reverse mortgage transaction has been completed.  Allowing for such an exception essentially nullifies this important prohibition.”

RE: proposed changes to restrict consumers’ right of rescission:

 “The proposal reorders the steps detailed in TILA, thereby putting the onus on the borrower . . . .  Rather than making rescission a workable remedy, the proposal turns the statute on its head by holding the consumer’s rescission hostage to the tender obligation.  The proposed changes . . . would functionally nullify homeowners’ right to rescind.”   


#  #  #

November 24, 2010


Board of Governors of the Federal Reserve System

20th Street and Constitution Ave, NW

Washington, DC 20551


Re:  Proposed Truth-in-Lending Mortgage Regulations (FRB Docket No. R-1390)


Dear Board of Governors:

I am writing on behalf of AARP and our millions of members to request that the Board withdraw the proposed Truth-in-Lending (TILA) mortgage regulations in FRB Docket No. R-1390.  While some proposed changes to TILA included in FRB Docket R-1390 will certainly benefit consumers, two provisions, in our view, would have such severe consequences for our members that we believe it prudent to withdraw the entire proposal.  These include the proposed safe harbor provisions for cross marketing of annuities and investment products in connection with reverse mortgages and proposed changes to restrict consumers’ right of rescission.  Not only would those two provisions greatly undermine existing consumer protections, they break with Congressional intent and exceed the authority given to the Board.

Included among the changes in disclosure requirements for reverse mortgages in FRB Docket R-1390 is a prohibition on requiring a consumer to purchase any financial or insurance product, including an annuity, as a condition for obtaining a reverse mortgage.  Unfortunately, this prohibition includes a safe harbor provision that deems transactions to be in compliance if the purchase of such financial products occurs at least 10 calendar days after the reverse mortgage transaction has been completed.  Allowing for such an exception essentially nullifies this important prohibition.  Additionally, this approach is inconsistent with the prohibition on cross-marketing financial products to reverse mortgage borrowers contained in the Housing and Economic Recovery Act of 2008 (P.L. 110-289), which not only prohibits any originator of a reverse mortgage from requiring purchases of financial or insurance products, but also prohibits originators from any association with “any party that participates in, or is associated with any other financial or insurance activity.”  This safe harbor proposal also appears to be contrary to the intent of provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) which require the Consumer Financial Protection Bureau to conduct a study of reverse mortgage marketing practices and issue regulations, as necessary, for “protecting borrowers with respect to obtaining reverse mortgage loans for the purpose of funding investments, annuities, and other investment products and the suitability of a borrower in obtaining a reverse mortgage for such purpose.” 

In regards to the right to rescind in TILA, FRB Docket R-1390 proposes a number of changes that would severely limit protections that homeowners currently have.  As you know, the right to rescind is a Congressionally-created remedy unique to TILA whose strength is directly proportional to the risk undertaken by borrowers who put their homes on the line.  Rescission has been used by attorneys at AARP and elsewhere for decades to protect older homeowners trapped in mortgages with onerous terms.  FRB Docket R-1390 would terminate a homeowner’s right to rescind a mortgage that has been refinanced or paid off.  Because TILA is explicit about the events that terminate the right to rescind, we are concerned that this proposal exceeds the Board’s authority.  Additionally, the ability to rescind prior mortgages within the three-year statute of limitations has been instrumental to saving the homes of thousands of homeowners who were victimized by a series of predatory mortgages.  Terminating the right to rescind those mortgages gives the previous creditors free passes and deprives the homeowner of the return of fees and interest paid on those mortgages that may, especially in these times of depressed home values, be required to accomplish a loan modification and/or rescission on the current mortgage. 

Perhaps more significantly, the Board’s proposal regarding tender is troubling. TILA sets out the steps and the timeline on which the process of rescission is to proceed. The first step is the release of the security interest by the creditor, followed by tender by the borrower. The proposal reorders the steps detailed in TILA, thereby putting the onus on the borrower to tender payment of the remaining loan proceeds before the creditor must take any action.  Rather than making rescission a workable remedy, the proposal turns the statute on its head by holding the consumer’s rescission hostage to the tender obligation.  The proposed changes relating to tender and rescission of prior mortgages would functionally nullify homeowners’ right to rescind.   

In the past few years, we have witnessed a housing crisis filled with too many personal tragedies brought about by inadequate consumer safeguards.  Because of the serious potential harm the above-mentioned provisions could also cause our members and consumers generally, AARP strongly urges the Board to withdraw FRB Docket R-1390 and to permit a broader discussion of these and other changes to TILA next year by the Consumer Financial Protection Bureau.  While urging withdrawal of the full proposal at this time, AARP wishes to reserve the right to provide detailed comments and suggested alternatives to other sections of FRB Docket R-1390 should the Board determine to proceed.   

Thank you very much for your consideration of this request.  Should you have any questions or require further information, please feel free to contact Diane Beedle on our Government Relations staff at 202-434-3798 or dbeedle@aarp.org. 


Sincerely, 



David Certner

Legislative Counsel and Legislative Policy Director

Government Relations and Advocacy

Search Press Center

PRESS CONTACTS

If you are an AARP member and not with the press, call 1-888-OUR-AARP or email member@aarp.org.

 

If you are a reporter with a media inquiry please contact the AARP Media Relations Office: 202-434-2560 or media@aarp.org.

 

Like us on Facebook: AARP Media Relations

Follow us on Twitter: @aarpmedia

 

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Anna's Linens

Member save 10% every day at Anna's Linens and AnnasLinens.com.

Faanui Bay, as seen from beach on Bora Bora, French Polynesia

Members save up to $525 on vacations at AARP® Travel Center powered by Expedia®

Pepperoni Pizza, Papa Johns Superbowl promotion for AARP members

Members save 25% off regular price menu items at Papa John's

Member Benefits

Join or renew today! Members receive exclusive member benefits & affect social change.