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Congressmen Ney and Kanjorski Introduce the "Responsible Lending Act"

March 15, 2005

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Responsible Lending Act

Section-by-Section Analysis

Congressman Bob Ney (R-OH), Chairman of the Subcommittee on Housing and Community Development, and Congressman Paul E. Kanjorski (D-PA),have introduced the new Responsible Lending Act, in the 109 th Congress along with a bipartisan group of their colleagues. Their bill responds to growing complaints about so-called “predatory” lending practices and conflicting state laws, as well as the need to further enhance consumer education and protections.

“There is a genuine need for strong uniform national lending standards with appropriate enforcement mechanisms, and it is important to build on the growing bipartisan consensus about the need to address these important issues,” said Congressman Kanjorski. “I am therefore very pleased that Congressman Ney worked with me to refine and enhance his original legislation. We believe that the bill we have introduced today provides the most comprehensive, balanced, and effective set of legislative solutions that any Federal or State bill has ever offered for protecting mortgage borrowers from abusive, deceptive, and unfair lending practices.”

Congressman Ney introduced H.R. 833, the original Responsible Lending Act, at the start of the 108 th Congress, to address issues in the subprime marketplace, which helps people with less-than-perfect credit to purchase homes, establish better credit records, and join the economic mainstream. Since that time, others interested in the issue of subprime lending have put forward their own proposals to address these issues, including Senator Paul Sarbanes (D-MD), the Ranking Member of the Senate Banking Committee, and Congressmen Brad Miller (D-NC) and Mel Watt (D-NC), two active Members of the House Financial Services Committee.

Congressman Kanjorski noted, “The new Responsible Lending Act significantly strengthens many of the provisions contained in the earlier Ney legislation, and it adds numerous additional borrower safeguards. The new bill also incorporates suggestions put forth in hearings held during the last Congress, concepts from earlier Federal legislative proposals and various State laws, and recommendations from Members of the House Financial Services Committee, Federal and State regulators, consumer advocates, and industry representatives.”

Specifically, the new Responsible Lending Act includes many provisions that strengthen and refine the Home Ownership and Equity Protection Act (HOEPA), which is the primary Federal law intended to protect mortgage borrowers from abusive lending practices. These refinements generally apply to higher-cost mortgage loans. In addition, the bill amends some aspects of related statutes, such as the Real Estate Settlement Procedures Act (RESPA), in order to enhance mortgage servicing safeguards.

The bill also modifies Federal housing statutes to improve housing counseling assistance, and updates the national laws governing appraisals to enhance appraiser education and licensing, to improve Federal oversight of State appraisal programs, and to augment appraiser independence. The legislation additionally establishes uniform mortgage broker licensing standards and sets up a national registry to monitor the industry. A short summary outlining the key provisions contained in the new Responsible Lending Act is attached.

Congressman Ney said that he hopes that his colleagues in the House and Senate, industry leaders, consumer groups, and regulators will continue to offer constructive comments about and ideas for the new legislation in the weeks and months ahead. “As I said two years ago when I first introduced the Responsible Lending Act, I am flexible and willing to refine the bill. That’s exactly what Congressman Kanjorski and I did after gathering additional input and discussing the issues. I hope that everyone will continue to offer their ideas so that we can further improve this bill going forward,” concluded Congressman Ney.

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