H.R. 3915, Mortgage Reform and Anit-Predatory Lending Act
(Senate Truth in Lending Act [TILA] Provision)
ARDA supports the goal of
devising strong but sensible legislation that provides clear, objective
and balanced standards to protect borrowers’ primary residences
against predatory lending practices. We encourage this ongoing effort
and believe that Congress can accomplish this goal without hampering the
ability of the timeshare industry to provide affordable vacation use
products to consumers.
Ongoing Congressional attempt
to address the growing subprime mortgage lending crisis resulted in
devising a set of protections for purchasers of primary and secondary
residences. ARDA faced a number of issues concerning the use of the term
“dwelling” and “loan originator” in various
legislative proposals. The overly broad definition of those terms has
resulted in the timeshare industry being inadvertently swept up into
these proposals. We continue to point out to the Congressional staff
that the sale and financing of a timeshare more closely compares to a
“pre-paid vacation week” rather than a traditional mortgage
transaction.
As the U.S. Senate voted on
Government Sponsored Enterprises/FHA reform package, an amendment within
that package contained the so-called “SAFE ACT,” which
creates a national licensing system for residential mortgage loan
originators. It would also develop minimum standards of conduct to be
enforced by state regulators. According to the definition of “loan
originator,” ARDA believed the licensing requirements would apply
to the timeshare industry.
ARDA immediately reached out to
Senator Mel Martinez (R-FL), who was the sponsor of the proposal. Senate
staff acknowledged that the language used had possibly inadvertently
impacted a small group of interests, including the timeshare industry.
Working with Senator Martinez and Senate Banking Committee Chairman
Chris Dodd (D-CT), ARDA pulled together information detailing the
various state licensing and regulations governing the timeshare industry
in order to prove that there are sufficient state regulations protecting
consumers to warrant a modification to the SAFE Act exempting
timeshares.
H.R. 3915 eventually
passed in the U.S. House of Representatives on November 15, 2007. It
subsequently passed the Senate and President George W. Bush signed into
law the Secure and Fair Enforcement (S.A.F.E.) mortgage Licensing Act of
2008 as part of the Housing and Economic Recovery Act. ARDA was
successful in demonstrating that timeshare sales are heavily regulated
at the state level with rescission rights available to consumers in 45
states. The applicable rescission period, which allows a consumer to
cancel his purchase and loan for any reason whatsoever, runs from 3 days
to 15 days from the date of purchase agreement is signed. Subsequently,
timeshare was successfully carved out of this legislation. ARDA
maintains a chart that lists the applicable rescission periods under the
45 state laws which regulate timeshare sales and
financing.
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