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Predatory lending bill introduced in House
WASHINGTON (3/30/09)—Co-sponsors of a new bill to crack down on predatory lending say H.R. 1728 is a tougher version of a bill in the last Congress designed to overhaul mortgage regulations. The new Mortgage Reform and Anti-Predatory Lending Act of 2009 is was scheduled for a vote tomorrow by the House Financial Services Committee, but that vote has been postponed. The bill is modeled after North Carolina’s predatory lending statute. In 1999, North Carolina passed the nation's first anti-predatory mortgage lending law. It is considered by many to be a model for preventing abusive lending practices, while preserving consumer access to credit. The Credit Union National Association (CUNA) strongly supports congressional action to protect consumers from abusive and deceptive lending practices. Yet, CUNA earlier has advised federal lawmakers that credit unions’ long history of favorable lending practices, and the range of regulation under which the movement operates, makes some provisions of such legislation more appropriate for the mortgage brokerage industry. The bill is sponsored by Reps. Barney Frank (D-Mass.), chairman of House Financial Services, Brad Miller (D-N.C.) and Mel Watts (D-N.C.). In a release announcing the bill, Watt said, “This bill represents an important step toward preventing the predatory and questionable practices that took hold in the mortgage lending industry in the past several years and undoubtedly contributed to our current housing crisis.” Specifically, according to the co-sponsors, the new measure will strengthen restrictions on compensation paid to mortgage loan originators and brokers that is based on a loan’s interest rate and terms—known as yield-spread premiums. It also includes stronger language on “assignee liability,” intended to make mortgage securitizers, who package home loans into securities, more liable for fraudulent loans. A key element of the legislation prohibits lenders from underwriting loans that consumers do not have a reasonable ability to repay and prohibits practices that increase the risk of foreclosure for consumers. The bill also encourages the mortgage market to make it the norm to write 30-year, fixed-rate, fully documented loans, and move away from growth of “exotic” mortgages, which were a major factor in the current housing and foreclosure crisis. Use the resource link below to read legislation details.
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