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House Passes Historic Mortgage Reform Legislation

November 19, 2007

   Related Information
The Mortgage Reform and Anti-Predatory Lending Act of 2007
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Washington, DC - The U.S. House of Representatives approved historic bipartisan legislation to reform mortgage and anti-predatory lending practices by a vote of 291 to 127. H.R. 3915, the “The Mortgage Reform and Anti-Predatory Lending Act of 2007” will establish a national standard to rein in the abusive lending practices that contributed to the current mortgage crisis.

“We are dealing with legislation that seeks to prevent a repetition of events that caused one of the most serious financial crises in recent times. There is no debate about what is the largest single cause of that. Innovations in the mortgage industry in themselves are good and useful, but were conducted in such a complete unregulated manner and led to this crisis,” said Financial Services Committee Chairman Frank. “I thank Ranking Member Bachus, representatives Brad Miller, Melvin Watt, and Financial Services Committee members from both sides of the aisle for their hard work on this bill.”

“Many believe that faulty mortgage lending practices have precipitated the credit crisis, and that the situation will get worse before it gets better,” stated Ranking Member Spencer Bachus. ”This legislation achieves two very important goals: implementing reforms that will help protect consumers from predatory lending practices, and preserving working Americans’ access to consumer credit. While H.R. 3915 is not a perfect bill – no bill ever is – it has been significantly improved through bipartisan negotiations.”

This comprehensive legislation will create a licensing system for residential mortgage loan originators, establish a minimum standard requiring that borrowers have a reasonable ability to repay a loan, and will attach a limited liability to secondary market securitizers. The legislation will also expand and enhance consumer protections for “high-cost loans,” will include protections for renters of foreclosed homes, and will establish an Office of Housing Counseling through the Department of Housing and Urban Development. 

The legislation will also include provisions for:

  • Registering Mortgage Originators to Prevent Abuses:  Currently, there is no national standard for the licensing of mortgage originators.  This has allowed for lax oversight and enforcement of how mortgages are made and sold and in many areas had lead to the potential for abuse.  H.R. 3915 will require originators to be part of a national registration system, either through the states or the Department of Housing and Urban Development.  This system for licensing and registration will ensure  that mortgage originators are registered in a national database (much like securities brokers) and meet minimum education and certification standards.
  • Ensuring Responsible Lending: Mortgage originators will be required to provide full disclosures and present consumers with appropriate mortgages. This means that the originator will have to ensure that a consumer who receives a mortgage loan: 1) has a reasonable ability to repay the loan; and 2) will receive a net tangible benefit from the loan in the case of a refinancing. 
  • Preventing Abusive and Discriminatory Lending:  Statistics have shown that many homeowners in the current mortgage crisis received more expensive loans than they qualified for. This is often the result of a predatory practice known as “steering.”  H.R. 3915 will prohibit the undisclosed and unfair compensation schemes that disadvantage borrowers, and require regulations to prevent steering for subprime loans.  Mortgage originators who engage in predatory practices and loan steering will be subject to strict penalties.
  • Holding Wall Street Accountable: Because mortgage companies can sell loans on the secondary market, they are often bought by large Wall Street firms and turned into securities for investors.  This bill contains unprecedented federal consumer protections that will subject Wall Street firms to liability if they buy, sell and securitize loans that consumers cannot repay.  They will be held accountable by consumers and will have the ability for loans to be rewritten and reworked.
  • Establishing a National Standard for Liability:  The current patchwork of state laws across the country has led to a lack of clear accountability in the lending process. H.R. 3915 will establish a national standard regarding assignee and securitizer liability, requiring that the borrowers have a reasonable ability to repay and ensuring that there will be a net tangible benefit to the borrower.  Wall Street firms will finally be held accountable at the federal level for their actions in the mortgage market, while States remain free to pass more stringent laws against lenders and originators.
  • Protecting Tenants:  Renters can also be affected if the homes that they rent go into foreclosure.   This legislation will provide protections for renters so that they receive proper notification and are given time to relocate before the home they rent is foreclosed.
  • Providing Consumer Protections for High Cost Loans: Provides Consumer Protections for High Cost Loans: H.R. 3915 expands the scope of and enhances consumer protections for “high-cost loans” under the Home Owners Equity Protection Act by lowering points and fees and interest rate triggers prohibiting practices that increase the risk of foreclosure such as balloon payments, encouraging a borrower to default; and requiring more pre-loan counseling.



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