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Daily Real Estate News | September 6, 2007
Congress Ready to Tackle Subprime Lending
Congress returned from vacation this week ready to propose a variety of mortgage borrower protection legislation.
On Wednesday, Sen. Christopher Dodd of Connecticut, chairman of the Senate Banking Committee and a candidate for the Democratic presidential nomination, announced plans for a bill that aims to curtail predatory lending by prohibiting prepayment penalties on subprime loans, making it illegal for lenders to write subprime mortgages for prime borrowers, and banning yield-spread premiums on subprime mortgages.
Democrats on the House Financial Services Committee – Chairman Barney Frank of Massachusetts and North Carolina Reps. Melvin Watt and Brad Miller – plan to introduce a bill that is likely to mirror Dodd’s in most respects, but they want to address another issue as well. Their version will propose making secondary buyers of mortgage debt legally liable for the underlying loans.
Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents national lenders, says that additional liability would increase interest rates by an average of 1.5 to 2 percentage points.
Getting this or any anti-predatory lending legislation passed isn’t a slam-dunk because, in general, Republicans aren’t supportive. "The one thing we shouldn't do is rush out and change a market that is working and working well, and brought home ownership to historic highs," says Republican Rep. Spencer Bachus, the ranking member of the House Finance Committee.
Source: The Wall Street Journal, James R. Hagerty, Kara Scannell and Sarah Lueck (09/06/07)
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