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Week of 11.16.07

Will Washington Fix the Mortgage Mess?

Bill for New Mortgage Standards Voted in House

Sign reading House for Sale On November 15, the House passed H.R. 3915—the "Mortgage Reform and Anti-Predatory Lending Act of 2007"—legislation that supporters say would take a big step forward in reducing the number of foreclosures. The bill, sponsored by Democratic Rep. Barney Frank of Massachusetts, offers reforms that would provide basic protections to consumers and investors in the mortgage lending market. Among other reforms, the bill would create a federal standard for ensuring that borrowers have a reasonable likelihood of being able to repay their loans and outlaw abusive lending practices. Several Republicans lent their support to the bill and it passed out of the House Financial Services Committee, by a vote of 45 to 19.

Generally, subprime mortgages are loans given to borrowers with bad credit histories—consumers with credit scores below 620 or little experience with debt.
Some consumer groups criticize the bill for letting Wall Street investment banks off the hook. Many pro-business groups oppose the bill because they believe it would increase the cost and reduce the availability of mortgage credit. Many in the lending industry are calling for federal legislation that preempts state law and creates a national standard so that lenders are held to the same standard in every state.

Over in the Senate, Democrats are pushing measures that make it easier for more borrowers to refinance subprime loans into government-insured FHA loans. A bill sponsored by Sen. Chuck Schumer, D-N.Y., would increase Fannie Mae and Freddie Mac's role in the home mortgage market to make more credit available to borrowers. The fate of these measures is as unclear as the fate of American consumers, whose homes and lives hang in the balance.

Related Links

H.R. 3915

U.S. Congress prepares for flurry of housing legislation