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
