House Tries Mortgage Lending Reform Again

Politico
May 6, 2009
McGrane, Victoria

As House lawmakers prepare to vote for a second time on a mortgage reform bill that that would, among other steps, require licenses and registration for mortgage originators and force lenders to take borrowers' debt-to-income ratios and repayment ability into account, consumer advocates insist that the bill has some weak spots. Under the current proposal, lenders have 90 days to fix violations when homeowners bring problems to their attention; and they do not face penalties during this period. Consumer advocates argue that homeowners would need lawyers to determine whether they have a bad loan. "We think the market will just figure this into the cost of doing business," explains the Center for Responsible Lending's Julia Gordon. She also criticizes the measure for exempting trusts and investors from the assignee liability provision, and she faults a new provision that would let federal banking regulators modify the requirement that lenders retain a 5-percent ownership in all mortgages they originate. "Once again, that's giving a special layer of protection to the loans that are clearly the most problematic," Gordon remarks.