House Bill Proposes Yield-Spread Premium Restrictions

Two House representatives from North Carolina and the House Financial Services Committee chairman have introduced a new bill that looks to curb predatory lending.

Reps. Brad Miller, Mel Watt and Barney Frank have proposed the Mortgage Reform and Anti-Predatory Lending Act of 2009, which they call a ‘tougher’ version of a measure that Miller sponsored in the previous Congress. Miller's previous bill passed the House in 2007 with bipartisan support, but was never considered in the Senate.

‘The political climate has changed,’ Miller says. ‘The foreclosure crisis has wreaked havoc on middle-class families and our economy as a whole. The industry's arguments for watering the bill down are not at all convincing.’

Specifically, the new measure hopes to strengthen restrictions on yield-spread premiums paid to mortgage loan originators and brokers, make mortgage investors more liable for fraudulent loans that are packaged into securities and prevent lenders from underwriting loans that consumers do not have a reasonable ability to repay.

The bill, modeled after North Carolina's predatory lending statute, also encourages the market to move toward making 30-year fixed-rate, fully documented loans the norm again in mortgage lending.

‘This bill represents an important step toward preventing the predatory and questionable practices that took hold in the mortgage lending industry in the past several years and undoubtedly contributed to our current housing crisis,’ Watt says. ‘Mortgage lending reform is a vital piece of the Congressional effort to prevent a future financial services disaster of this scale.’

SOURCE: Office of Rep. Brad Miller


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