I want to thank Chairman Faircloth and Chairman Mack for organizing this series of hearings on one of the more complicated issues we must deal with in this Committee -- the Real Estate Settlement Procedures Act and its interactions with the Truth in Lending Act.
RESPA and TILA are two laws that have formed the bedrock of consumer protection in the area of mortgage finance. They have helped bring some uniformity to the mortgage markets; they have helped ensure that consumers are better informed; and they have set the parameters within which healthy competition can take place.
It is worth remembering that for most Americans, their home represents the largest single investment they will ever make. The ability to send their children to college, to withstand unexpected economic shocks, and to achieve a secure retirement frequently rests in the equity that these families have built up in their homes. As a result, I am sure we all agree, and the law recognizes, that the purchase of a home deserves a special level of protection for consumers. That has been the purpose of both RESPA and TILA.
Over time, markets have changed and technology has become more sophisticated. Consumer protection laws must be adapted to this new environment for two reasons:
First, we want to make sure that the legal and regulatory environments continue to provide adequate information and protections to consumers, particularly as the sophistication of the industry increases, making it all the more difficult for consumers to judge among competing claims and products; and,
Second, we do not want laws that did not contemplate current technology from curtailing innovations that will provide faster, cheaper, and more efficient allocation of mortgage credit.
It appears that everyone -- regulators, consumers, and industry represenatives -- agrees that RESPA and TILA are due for a "tune-up." I want to strongly encourage and lend my enthusiastic support to the joint effort you are now undertaking to work toward developing a single set of more effective disclosures that protect and inform consumers while reducing the paperwork burden on lenders.
Let me suggest two principals. Consumers need to be given information as early in the process as possible. This means prior to paying mortgage application fees. I need price information before I spend money if I am going to make an informed decision about what and where to buy.
In addition, we need to establish a uniform definition of "cost." If different lenders use different methods of calculating interest rates, or add on additional fees in a haphazard fashion, the consumer doesn't have a common basis on which to compare mortgage products.
I am not prepared to recommend exactly when disclosures should be made, or how the final price of a loan should be calculated; I leave that to the expertise of the people sitting at the witness table. But it seems clear to me that the goal has to be to create as efficient a market as possible, and that we will achieve that first and foremost by putting clear information on a timely basis in the hands of American homebuyers.
Again, thank you for holding these hearings. I look forward to
hearing the testimony.
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