Mortgage Reform and Anti-Predatory Lending Act Passes House

Today, the House passed the Mortgage Reform and Anti-Predatory Lending Act (H.R. 1728) by a vote of 300-114. This legislation responds to the subprime mortgage crisis by instituting much needed reform — stopping the kinds of predatory and irresponsible mortgage loan practices that played a major role in the current financial and economic meltdown.

To restore the integrity of mortgage lending industry, this bill ensures that the mortgage industry follows basic principles of sound lending, responsibility, and consumer protection:

borrowers can repay the loans they are sold

mortgage lenders make loans that benefit the consumer and prohibit them from steering borrowers into higher cost loans

all mortgage refinancing provides a net tangible benefit to the consumer

the secondary mortgage market, for the first time ever, is responsible for complying with these common sense standards when they buy loans and turn them into securities

there are incentives for the mortgage market to move back toward making safe, fully documented loans

tenants renting homes that are foreclosed would receive notification and time to relocate

Speaker Pelosi on passage:

The Mortgage Reform and Anti-Predatory Lending Act will protect homeowners and our economy from the questionable and predatory lending practices that led to record home foreclosures and helped cause the worst financial crisis since the Great Depression.

The simple fact is that our laws and enforcement efforts did not keep pace with the complexities of a global economy and a financial industry where the greed of some trumped common sense.

Insisting on responsible borrowing and lending and ensuring that borrowers enter into mortgages they can repay or refinance will help families protect their most valuable asset –their home –and guard against another financial and housing market meltdown. This legislation represents a key piece in Congress' initial efforts to revamp the nation's financial regulations to restore integrity and common sense to our nation's economy.

The passage of this bipartisan legislation, along with our Credit Cardholders' Bill of Rights and the Fraud Enforcement and Recovery Act, illustrates the New Direction Congress' continued commitment to protecting taxpayers and fighting for consumers and small business owners. I look forward to seeing these landmark consumer and taxpayer protection bills signed into law soon by President Obama.

Rep. Brad Miller (D-NC), the author of this legislation, responds to Republican arguments that “now is not the right time” to pass this bill:

Rep. Miller:
“I rise to respond to what several on the other side have said…that now is not the time to do this…I introduced this legislation, legislation like it in 2003 and 2005 and 2007 and now again in 2009. It has never been the time by the likes of the members of the minority party and by the likes of the lending industry. Now, their arguments have been a little different. In 2003 and 2005 they said, 'are you kidding? These loans are great. This is the unfettered market at its best, creating these innovative loans so people can get credit that they otherwise couldn’t get. And those Democrats like Miller who want to restrict it, they just don’t know a good thing when they see it.' In 2007, especially now, they’re saying, isn’t it terrible that all those liberals made the poor lenders make these loans? but now is not the time, now is not the time to restrict credit.' Madam Speaker, they will never think it’s the right time to protect the American people from abusive lending practices.”

Rep. Mel Watt (D-NC):

Rep. Watt:
“This has been a very difficult and delicate bill to balance because we have tried to on the one hand not dry up the credit, the money that is out there to be in the market for lenders to make loans to potential homeowners, and to current homeowners to refinance while at the same time cutting back on the abuses that took place in the marketplace that led to the credit crisis and the economic meltdown that I just described. Balancing those two interests has been difficult and unfortunately those interests were balanced inappropriately in the past because credit obviously was made too readily available to too many people who could not afford to pay it back, who are now in foreclosure proceedings, now in bankruptcies and we are seeing the negative consequences of an unrestrained market.”

Chairman Barney Frank (D-MA):

Rep. Frank:
“I know my Republican friends tell me they are opposed to predatory lending. At no point, however, have they taken any initiative in bringing any legislation to the floor to deal with it or to urge it be done in a regulatory way. For 12 years they were in control — not a single bill came forward. My friend from Alabama did have a sincere interest here and he had a good proposal. It wasn’t until the Democrats were in the majority and we brought a bill to the floor that he was able to offer his bill which we embraced and even then while he voted for the final bill, 2/3 of his colleagues voted no.”

Rep. Bill Pascrell (D-NJ):

Rep. Pascrell:
“In New Jersey, 1 out of 24 homes are in foreclosure. In my home town of Paterson, NJ 1 out of 7 are in default. And to hear many on the other side is outlandish. You cannot support what you are talking about. My district office oversees dozens of calls every day from my constituents who cannot pay their skyrocketing mortgages and fear imminent eviction. For years as the housing bubble grew, unscrupulous brokers in quest for high commissions and high profits preyed on the American dream of homeowners by signing borrowers, many of them unqualified, risky, adjustable rate subprime mortgages. That’s what we’re talking about today. That’s what we’re going to correct.”

Rep. Jim Langevin (D-RI):

Rep. Langevin:
“Mortgages have left countless Americans facing foreclosure, and this is especially true in my home state of Rhode Island with one of the highest foreclosure rates in the country. With this bill we will combat unscrupulous lending practice and bring transparency to the process by requiring mortgage originators to be licensed and mandating full disclosure of loan terms. Perhaps most importantly, mortgage originators must certify that consumers have a reasonable ability to pay back the loans that they are applying for and they are not predatory in nature. We have seen too many lenders steer consumers into loans that they cannot afford.”

Rep. Jan Schakowsky (D-IL):

Rep. Schakowsky:
“According to a recent report, foreclosures in Chicago doubled from 2006 to 2008 and continue today. It was Chicago’s 50th ward that saw the highest increases in foreclosures, 360% in just two years. When most people walk into a mortgage closing, they bring with them the hopes and dreams of their futures and those of their children and the full intention of being responsible homeowners. But actions by unscrupulous predatory lenders put many Americans into loans they couldn’t afford and the consequences are clear. This bill offers protections for home buyers that are long overdue.”