From: Claude Beaucage
Sent: Wednesday, March 03, 2004 12:25 PM
To: regs.comments@federalreserve.gov; Comments; regs.comments@occ.treas.gov;
regs.comments@ots.treas.gov
Subject: EGRPRA/ Regulation Z/Rescission
Thank you for giving us the opportunity
to voice our opinion regarding regulatory burdens. I am very familiar
with Regulation Z, having been in banking since the regulation's
implementation. Based upon this long term of experience, I have one
issue with the regulation: its provision for rescission.
I remember the original intent for the
rescission provision was to target quick sales of products like aluminum
siding, roofing, and other services that are sometimes done with shabby
work and funded by customers refinancing mortgages to tap into their
homes' equity. I understand this is protecting customers from fraudulent
contractors, etc.
But a more common use of rescission is
customers taking advantage of this provision during times of dropping
rates. For example, Mr. Shopper walks in and applies for a loan, and
gets a rate lock. In the period between locking the rate and the
closing, mortgage rates continue to drop. At the closing Mr. Shopper now
wants to break the rate lock and demands a lower rate being offered. If
we ask him to pay the difference in points between the original rate he
locked and the new rate he demands, Mr. Shopper tells us he will rescind
the loan as allowed under Regulation Z and go across the street to XYZ
Bank.
Now we are in a bind. If we surrender and
give him the new lower rate, we loose yield and this cost hits our
bottom-line. If we hold firm and stick with the original agreement to
the locked rate, Mr. Shopper rescinds the loan and then we end up eating
several hundreds of dollars in third party costs - inspections, titles
searches, etc.
This working of the rescission provision
by unscrupulous borrowers is costly, unfair, and a burden to lending
institutions. A clearer definition of what should constitute a valid
rescission would be helpful. I might add that in my 36 years of banking
I can only recall one instance where a customer had a valid rescission.
Thank you once more for the opportunity
to point this issue out to you.
Claude Beaucage
SVP, Retail Lending
Androscoggin Savings Bank
30 Lisbon Street,
Lewiston, Maine 04240 |
