House Tackles Subprime Meltdown, Amends Truth In Lending Act

The House this week voted 291-127 to pass the Mortgage Reform and Anti-Predatory Lending Act, Congress’ first major attempt to prevent a recurrence of the ongoing subprime meltdown. The bill, supported by every Democrat and 64 Republicans, stabs at the heart of the meltdown by:

  • Establishing a national licensing and registration system for mortgage lenders;
  • Establishing the Office of Housing Counseling within HUD to help borrowers avoid foreclosure;
  • Banning loans that a borrower cannot reasonably repay;
  • Banning lenders from steering borrowers towards loans with predatory characteristics;
  • Making banks that securitize mortgages liable for violating lending laws.

The mortgage lobby spent several weeks trying to derail the bill as it percolated in Committee. Even some consumer advocates oppose the bill in its current form because it preempts strong consumer protections from the states with a uniform federal standard.

The mortgage lobby has already shifted its focus towards killing companion legislation stalled in the Senate. Senate Banking Chairman Chris Dodd (D-CT) has released only a vague sketch of his chamber’s response to the subprime meltdown, saying that his legislation will meet two requirements:

[First], it must establish strong standards against abusive practices such as prepayment penalties, steering, and other problems. Second, it must provide for strong enforcement to ensure that those standards are met. My bill…will meet both requirements and help protect homeowners from predatory lending.

Still unknown, how he plans to achieve objectives one through two.

The White House has issued a Statement of Administrative Policy objecting to several provisions of the House bill, but has restrained itself from issuing a veto threat.

House Votes to Rein in Certain Mortgage Lending Practices [AP]
H.R. 3915 – Mortgage Reform and Anti-Predatory Lending Act of 2007 [THOMAS]
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(AP Photo/Kim Johnson Flodin)