Subprime mortgage crisis prompts need for major reform
Washington, DC, October 22, 2007 – Reps. Brad Miller (D-NC), Mel Watt (D-NC) and Barney Frank (D-MA) today introduced comprehensive legislation to combat abuses in the mortgage lending market, and to provide basic protections to mortgage consumers and investors. The bill, H.R. 3915, the “The Mortgage Reform and Anti-Predatory Lending Act of 2007” will reform mortgage practices in three areas. First, the bill will establish a federal duty of care, prohibit steering, and call for licensing and registration of mortgage originators, including brokers and bank loan officers. Second, the new legislation will set a minimum standard for all mortgages which states that borrowers must have a reasonable ability to repay. Third, the legislation attaches limited liability to secondary market securitizers who package and sell interest in home mortgage loans outside of these standards. However, individual investors in these securities would not be liable. Finally, the bill expands and enhances consumer protections for “high-cost loans” under the Home Ownership and Equity Protection Act and includes important protections for renters of foreclosed homes.
“Barney Frank, Mel Watt and I see protecting vulnerable homeowners from predatory mortgage lenders as a core, defining Democratic value. When a family’s home is a stake, lenders had better play by a fair set of rules,” said Rep. Brad Miller.
“This bill represents a significant step forward to clean up and prevent a number of the questionable practices that, unfortunately, took hold in the mortgage lending industry in the last several years. I hope the industry will embrace the changes and allow the bill to move forward quickly” said Rep. Melvin Watt.
The bill also contains foreclosure protections for renters. In case of foreclosure, any successor who takes over the property will have to honor preexisting leases. Tenants without a lease will have at least 90 days before being required to vacate. In addition, the bill will incorporate recommendations by Rep. Melissa Bean (D-IL) to require counseling for certain first time homebuyers; and Rep. Chris Murphy’s (D-CT) anti-steering legislation.