House on verge of passing bill setting new standards for mortgage originators

House on verge of passing bill setting new standards for mortgage originators

	Published : Thu, 15 Nov 2007 22:45 By : Agencies Print this Story

WASHINGTON (Thomson Financial) - The House today was headed toward approving legislation that would require mortgage originators to do more to protect borrowers, and make mortgage securitizers liable for damages if they securitize mortgages that do not conform to these rules.

House approval would be over objections from House Republicans who warned today that tightening

rules for mortgage originators would cut off credit for would-be home buyers.

'This is a bad bill for homeowners and will make a difficult situation even worse,' said Republican Study Committee Chairman Jeb Hensarling of Texas. 'This bill does nothing to help the people currently facing mortgage troubles; instead it restricts the ability for future buyers to receive home loans, causing greater harm to the housing market.'

The Mortgage Reform and Anti-Predatory Lending Act, which is being considered in a lengthy session today, would require mortgage originators, including bank employees that originate mortgages, to be licensed at the state level, or the federal level under a new Nationwide Mortgage Licensing System and Registry.

The bill would also take a range of steps aimed at ensuring fair treatment for borrowers in order to reduce future risks of mortgage foreclosure, including a prohibition on 'steering' borrowers to more costly loans and ensuring borrowers can pay back loans.

The bill would also attach limited liability to secondary market mortgage securitizers that securitize loans that do not follow the new loan requirements, although it would not make investors in mortgage-backed securities liable. The House today rejected a Democratic attempt to broadly expand the scope of liability that securitizers could face.

The Mortgage Bankers Association (MBA) and the Financial Services Roundtable have warned the House that they oppose certain provisions of the bill, including language that would require closer scrutiny of non-prime loans, and said this added scrutiny would make it harder for non-prime borrowers to secure a home loan.

Separately, the Senate today tried unsuccessfully to approve legislation that would make it easier for borrowers to refinance their mortgages through the Federal Housing Administration (FHA). So-called FHA modernization has been supported by the Bush administration, although Republicans objected to quickly approving the bill today without debate.

Senate Banking Committee Chairman Christopher Dodd said he was disappointed in today's failure to pass the bill, and said he would continue to work for its passage.

pete.kasperowicz@thomson.com

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