New Law Targeted At Mortgage Lending Abuses

December 26, 2007

One legislative action now working its way through Congress could potentially change the way mortgage bankers and brokers do business is a bill that has been introduced in Congress called "Mortgage Reform and Anti-Predatory Lending Act of 2007." The objective of the bill (H.R. 3915) is to minimize problems stemming from the current mortgage crisis and protect borrowers from lending abuses that can lead to foreclosures.

The bill would create a "duty of care standard" for residential mortgage loan originators. It would include regulations to prevent steering a borrower to a loan that is not in their best interest so the broker can earn more commission. And it would establish a nationwide registration regime. It would also call for minimum loan repayment standards, including taxes and insurance payments, based on verified and documented borrower information. It would eliminate loans with prepayment penalties, negative amortization and balloon payments for high risk mortgages, and it would require mandatory pre-loan counseling for some borrowers.

Another interesting part of the bill would set forth certain foreclosure protections for renters. "While the bill is filled with good intentions and does contain some reasonable and necessary changes to industry policies and procedures, there are some aspects of the bill that create an unfair advantage for institutional originators," it was noted in a feature carried by Originator Times. "It could possibly put some mortgage bankers and brokers out of business."

The bill was approved in the House of Representative on November 15, with a vote of 291 for it, 127 against.

Posted in All Things San Diego, Lending, Local Business, Real Estate, Things of Interest