Top New York State Regulator Urging Revamping National Mortgage Lending Rules

Richard Neiman, New York State Banking Chief

A top New York State banking regulator is pushing to overhaul federal mortgage lending regulations to help mortgage borrowers.

Richard Neiman, superintendent of banks for the New York state, wants to update the

Community Reinvestment Act which rates banks on how well they serve their mortgage borrowers and their communities. Find mortgage loan options.

Current CRA ratings don’t offer meaningful ratings or comparisons between banks, said Neiman, speaking at the CRA and Fair Lending conference in Las Vegas. “Year after year, 85 to 90% of banks receive a ‘Satisfactory’ rating,” said the banking chief, according to his prepared remarks posted on the state banking department website.

Ratings should be more precise, should include a low and high satisfactory ratings, and should include more factors, such as if banks offer safe and affordable lending products.

Ratings should also take into account banks’ safety and soundness, or how likely they are to survive a financial crisis.

Banks, he said, should also be encouraged to expand into underserved areas and rural areas.

The CRA does not cover non-banks, but federal regulators considering changing the CRA to cover more types of lenders, Neiman said.

Neiman, who is on the TARP Congressional Oversight Panel, also wants to create a national database on mortgage performance data for both banks and non-bank mortgage lenders. Lenders like mortgage bankers, who do not offer banking services like checking and savings accounts, are considered non-bank lenders.

A comprehensive database will provide better information on how many loan modifications different mortgage lenders and servicers are doing and will help offer a way out of “this mortgage mess,” Neiman said. Learn how to avoid foreclosure.

Knowing how many foreclosures lenders and their loan servicers are preventing is difficult to determine because they have own loan modification efforts in addition to the government’s Home Affordable Modification Program. That kind of database would show any racial or geographic differences in lenders’ decisions to modify loans or foreclose.

Different databases now collect and report loan modification information but they all have their drawbacks. “There is a real consensus forming,” he said, “and the next step is to move from these provisional approaches.”

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