House Moves on Predatory Mortgage Lending

Washington, DC, May 8, 2009--The House voted 300-114 to approve the Mortgage Reform and Anti-Predatory Lending Act, which would take steps to ensure that borrowers avoid overly costly mortgages, can pay back their creditors and receive better disclosures, among other actions.

While critics say the legislation is imperfect, consumer advocates say stricter rules are necessary to protect consumers and the economy.

Major provisions in the legislation would ensure that consumers have a reasonable ability to repay mortgages; prohibit compensation for steering consumers into overly pricey or risky loans; and require new federal rules to direct creditors to retain an interest in the credit risk of certain loans.

"We are likely to see fundamental changes in how the mortgage market is regulated sometime in the 111th congress," said Francis Creighton, chief lobbyist for the Mortgage Bankers Association. "This is such an important issue that we would expect Senate action [in committee] pretty soon."

John Taylor, president and chief executive of the National Community Reinvestment Coalition, said the bill would be helpful, but that it should allow enough room for state laws to prevent abuses, and limit preemption by federal standards.

"The industry is very clever, and reinvents products under different names. The more you allow states flexibility, the more they can respond. If Wall Street knows they will be held liable, it's less likely that they will invent new products that are predatory," Taylor said.