Himes Votes to Reform Mortgage Industry and Protect Consumers
Washington, DC – Congressman Jim Himes helped pass the Mortgage Reform and Anti-Predatory Lending Act of 2009, aimed at curbing the confusing, abusive, and predatory lending that helped create the foreclosure crisis. The bill would outlaw many of the mortgage industry practices that marked the subprime lending boom, and it would deter borrowers from deliberately misstating their income to qualify for a loan. The legislation passed overwhelmingly by a vote of 300 to 114 late yesterday.
“These types of predatory and irresponsible lending practices should never have happened,” said Congressman Himes. “This common-sense reform will help safeguard the rights of homeowners and the security of financial institutions to prevent a dangerous repeat of the mistakes of the past.”
The Mortgage Reform and Predatory Lending Act helps to restore integrity to the mortgage lending industry and will ensure that the industry follows basic principles of sound lending, responsibility, and consumer protection.
To protect homebuyers, this bill would require mortgage brokers and lenders make loans that benefit the consumer and prohibit those brokers and lenders from steering borrowers into higher cost loans. The legislation also requires lenders to verify borrowers can repay the loans they are sold. Homeowners wishing to refinance will have greater protections under this legislation as well by requiring that a refinancing leave the borrower better off than they would have been without changing their loan.
This legislation helps prevent future economic crises by aligning the incentives for the mortgage companies and lenders with the interests of consumers and borrowers. This risk-driven approach holds creditors responsible for the loans they create and incentivizes smart business decisions and good underwriting practices. The bill would require new federal rules to be written to require creditors and secondary market participants to retain an economic interest in the credit risk of each loan that the creditor transfers, sells, or conveys to a third party. Federal banking agencies would have the authority to make exceptions to the bill’s risk retention provisions.
“This reform is effective because it requires lenders to keep some skin in the game once they have sold a loan,” said Congressman Himes. “Leaving some of the risk with those who are paid to take it will help limit the heavy-handed government regulation that can stifle innovation.”