New Predatory Lending Bill Fights Foreclosure
By Gerri L. Elder
Congress is cracking down on predatory lenders across the country.
The Mortgage Reform and Anti-Predatory Lending Act of 2009
was introduced by Rep. Brad Miller (D-NC), Rep. Mel Watt (D-NC) and House
Financial Services Committee Chairman Barney Frank. The Act is geared to
slowing down the predatory lenders who are largely to blame for the nationwide
foreclosure crisis.
Rep. Miller previously sponsored a bill that would have
toughened up mortgage regulations in order to thwart another subprime mortgage
meltdown. The bill passed the House in 2007 with bipartisan support, but never
got a vote in the Senate. The current bill is a revision of that legislation,
and this time around Miller added teeth.
If passed, this legislation would prohibit lenders from
underwriting loans for borrowers who are obviously unable to repay them. The
bill includes language to encourage the mortgage industry to make 30-year
fixed-rate, fully documented loans the standard.
The Mortgage Reform and Anti-Predatory Lending Act of 2009
toughens up on the restrictions on compensation received by mortgage loan
originators and brokers. This compensation is generally called
"yield-spread premiums" and is based on the terms and interest rate
of a loan.
Mortgage banks sometimes pay the brokers extra for closing a
deal at a higher interest rate than the borrower could have qualified for or
gotten elsewhere. Rep. Miller says this practice is an "indefensible
conflict of interest."
The new bill also takes a stronger stance on assignee
liability and includes a provision that would assign more liability to mortgage
securitizers for fraudulent loans.
The bill provides protection for homeowners from predatory
lending practices by prohibiting refinance loans that do not provide a tangible
benefit and also by making the mortgage industry more transparent.
Miller modeled the act after the predatory lending statute
in North Carolina. The North Carolina law is considered the model state statute
for stopping predatory lending practices, while still allowing consumers to
freely access credit. The goal is to stop foreclosure before it starts.
The Center for Responsible Lending estimates 2.4 million
Americans are at risk of foreclosure in 2009. If nothing is done to improve the
situation, the statistics project 8.1 million foreclosures over the next four
years.
Predatory lending practices during the housing market boom
contributed to the foreclosure
rate surging to the highest point in 25 years. The foreclosure crisis has been
a major factor in the economic recession. Miller and the co-sponsors of the act
are working to get something done now to prevent a disaster like this from ever
happening again.
Learn how to stop foreclosure by filing bankruptcy.