[StBernard] House Passes Historic Mortgage Reform Legislation

[Westley Annis]

May 7, 2009                                                    

 

 

House Passes Historic Mortgage Reform Legislation

Washington, DC - The House of Representatives today overwhelmingly approved
legislation to curb abusive and predatory lending - a major factor in
America's highest home foreclosure rate in 25 years. H.R. 1728, the Mortgage
Reform and Anti-Predatory Lending Act of 2009, will outlaw many of the
egregious industry practices that marked the subprime lending boom. It
represents a key step in the overhaul of the nation's financial regulations.

The measure was introduced by Reps. Brad Miller (D-NC), Mel Watt (D-NC), and
Barney Frank (D-MA), and approved by a vote of 300-114.

 "Our economy will eventually recover and we will again have a healthy
housing market, but we're in for a tough spell. This legislation will ensure
that the reckless, predatory mortgage practices that started this crisis
will not happen again," said Rep. Miller.

            "My joy at House passage of this important bill is tempered by
my belief that we could have avoided the major credit and economic meltdown
we are now experiencing had we passed this legislation when Rep. Miller and
I originally proposed it 6 years ago. Unfortunately, the alarms we raised
were not heeded and millions of consumers, indeed our entire economy, paid a
heavy price," said Rep. Watt.

 

The legislation counters the trend toward irresponsible lending by
establishing a simple standard for all mortgages: lenders must make sure
that borrowers have the ability to repay the home loans they are sold. The
bill also requires that all mortgage refinancing loans benefit the consumer,
and it bans predatory schemes that "steer" borrowers into higher cost loans.
The growth of exotic, "no-documentation" loans, along with borrowers who
deliberately misstated their income to qualify for a loan, were key factors
in the recent subprime meltdown.

 

In addition, H.R. 1728 encourages a return to sound underwriting practices
by prohibiting mortgage lenders from relinquishing all responsibility for
the bad loans they make and sell to Wall Street. Under the measure, lenders
will now be required to keep "skin in the game" and retain a 5 percent stake
in any home loan they make and sell. Also, for the first time ever, the
large secondary mortgage market will bear responsibility for bad loans they
purchase and securitize, bringing accountability back to every level of the
mortgage lending chain. 

 

According to the Center for Responsible Lending, 2.4 million Americans risk
foreclosure in 2009, and that number could rise to 8.1 million over the next
four years.  Mortgage lending reform is a critical part of efforts in
Congress to reform America's financial system and prevent a future crisis of
this scale. If Congress had enacted these long overdue mortgage lending
reforms, which Democrats have been advocating since 1999, the subprime
lending meltdown could have been avoided altogether.  

 

To view a summary of H.R. 1728, click here
<http://www.house.gov/apps/list/press/financialsvcs_dem/summary_of_1728.pdf>
.

 

To view the amendments to H.R. 1728 approved by House today, click here
<http://www.house.gov/apps/list/press/financialsvcs_dem/ammendments.pdf> .

 

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