Predatory Lending Bill Introduced in House
On Monday, a bill designed to curb predatory lending practices was introduced to the U.S. House of Representatives. This bill is designed to 
hold mortgage lenders more accountable for whom they approve for home mortgage loans. The idea is to stop the practices that lead to such loans as 125% equity home loans, and practices, such as inflating an applicant’s income to get a higher loan amount and allowing 50% debt-to-income ratio applicants to receive home mortgage loans, that result in almost-inevitable foreclosures. MarketWatch reports on the predatory lending bill, introduced by Barney Frank, D-Mass.:
The bill creates a national standard for originating mortgages that will cover every mortgage originator, Frank said, including what he called a “common sense” approach to writing loans.
“People should not be loaned money beyond what they can be expected to pay back,” Frank told reporters on a conference call Monday morning. The bill calls for states to adopt rules that would cover originators and contains a fallback federal law if states don’t come through.
At a time when many loans to borrowers with poor credit are set to readjust to higher interest rates, Frank’s bill also imposes some new liabilities on investors that securitize such loans.
In addition to requiring mortgage lenders to make good faith assessments as to whether or not someone can pay back their home mortgage loan, the bill also protects the right of a borrower to sue the lender, although there are no provisions regarding class action lawsuits.
Predatory lending has been blamed for many of the foreclosures, as well as being a main factor in the current credit market crisis resulting from the subprime lending crash. More accountability for mortgage lenders could lead to sounder lending practices. This would limit the number of people eligible for home mortgage loans, as well as make it harder for people to buy more house than they can afford.
Tags: predatory lending bill, home mortgage blog, home mortgage loans, Barney Frank,
mortgage lenders, home loans, U.S. House of Representatives
October 28th, 2007 at 12:58 pm
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May 19th, 2008 at 11:01 am
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