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House Bill to Tighten Mortgage Regulations Introduced
House Financial Services Committee Chairman Barney Frank (D-Mass.), along with Reps. Brad Miller (D-N.C.) and Mel Watt (D-N.C.), on Oct. 22 introduced legislation to tighten mortgage regulations in the wake of the turmoil in the subprime mortgage market.
Frank said the new legislation would "diminish predatory lending while continuing to support a vigorous mortgage market."
H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, would:
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Require any mortgage lender to verify that the borrower has a "reasonable ability to repay" a loan
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Bar paying incentives to brokers who steer borrower's to more expensive mortgages
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Require mortgage originators to be licensed and registered under state or federal law
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Sharply restrict prepayment penalties
Expand and enhance consumer protections for "high-cost loans" under the Home Ownership and Equity Protection Act
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Allow home owners to sue brokers if they were placed into mortgages that they could not afford
During a hearing before the House Financial Services Committee this week to examine the legislation, federal regulators called on Congress to take a balanced approach to ensure that it protects borrowers without reducing liquidity in the mortgage markets ― which could wind up making it even more difficult for borrowers to obtain a mortgage or refinance an existing loan.
"Getting this balance right is particularly critical now, as many borrowers facing rate adjustments may need to refinance into more affordable loans," Federal Reserve Governor Randall Kroszner said in written testimony. He added that Congress should not approve any bill that would have a "detrimental impact on the ability of lenders to securitize loans."
Comptroller of the Currency John Dugan said that he "supports some of the broader standards" of the bill, but cautioned that "application of some of the new and extensive mortgage standards to banks that do not provide subprime mortgages raises significant issues of regulatory burden and fairness."
NAHB continues to monitor the situation and is evaluating individual provisions in the bill to determine their impact on the housing market.
NAHB policy is to support and encourage continued mortgage market innovation to improve housing affordability and expand homeownership opportunities as long as these loans are prudently underwritten to ensure that the form of financing is appropriate for the borrower and market and that consumers are fully aware of the features and risks of the loan.
For more information, e-mail Scott Meyer at NAHB, or call him at 800-368-5242 x8144.
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