WASHINGTON (12/13/07)—Sen. Christopher Dodd (D-Conn.) Wednesday introduced his anticipated mortgage reform bill, The Homeownership Preservation and Protection Act of 2007. In an announcement, Dodd said the bill is intended to “help put an end to the abusive and predatory lending practices that have sent thousands of Americans into foreclosure and put thousands more in danger of losing their homes.” Provisions of the bill would:
* Establish new protections for all borrowers, such as prohibiting brokers from steering prime borrowers to more expensive subprime loans, create a fiduciary duty for mortgage brokers towards borrowers, and provide for a duty of good faith and fair dealing toward borrowers for all lenders; * Establish new protections for subprime borrowers and borrowers who get nontraditional mortgages, in part by requiring a “real analysis” of the borrowers’ ability to repay the loan.; * Provide remedies to make sure such standards are met. The bill would allow state attorneys general to enforce the provisions of the law, and does not preempt state law; and * Provide for limited liability for holders of a mortgage made in violation of law, whether it is the original lender or a subsequent investment trust. Unlike current law, which puts the burden on the borrower to find the party responsible for causing the harm, the legislation would allow borrower to go directly to the current mortgage holder for a cure.
In November the House voted 291-127 in favor of the Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915), a comprehensive bill also intended to combat abuses in the mortgage lending market and to provide basic protections to mortgage consumers and investors. That bill would”
* Establish a federal duty of care, prohibit steering, and call for licensing and registration of mortgage originators, including brokers and bank loan officers; * Create a licensing system for residential mortgage loan originators, * Set a minimum standard for all mortgages which states that borrowers must have a reasonable ability to repay; and * Attach limited liability to secondary market securitizers who package and sell interest in home mortgage loans outside of these standards. The bill would not make individual investors in the securities liable.