WASHINGTON -- March 31, 2006 -- In separate letters to U.S. bank regulators, the Mortgage Bankers Association and America’s Community Bankers warned that too many lending rules would limit innovation.

The letters were in response to requests for public comment after multiple government offices in December issued guidelines concerning exotic or risky loan products.

"The private market can and does correct for excess risk more quickly than can a regulator who necessarily must move at a more deliberate pace," the mortgage lenders' group wrote.

The community bankers’ group objected to suggestions that bankers should offer borrower’s guidance.

"While it is the lender's responsibility to provide borrowers with sufficient information for them to clearly understand the loan terms and associated risks, we do not believe it is appropriate or possible for the lender to identify or dictate the best mortgage product for individual consumers," the group wrote.

Source: Reuters News (03/29/2006)

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