Congresswoman Chellie Pingree Opens Debate on Major Mortgage Reform Bill

Press Release

Congresswoman Chellie Pingree opens debate on major mortgage reform bill

Legislation would crack down on predatory lending and other practices that led to current mortgage crisis

Congresswoman Chellie Pingree opened the debate today on a bill that would crack down on predatory lending practices and reform mortgage lending. Pingree said if these reforms were in place a decade ago, we likely wouldn't find ourselves in the middle of a mortgage crisis now.

Pingree managed the floor debate this morning on H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. Debate will continue tomorrow when the House is expected to vote on the bill.

"The message is simple," Pingree said. "Lenders can't give loans to people who can't afford them. And borrowers have to tell the truth about their finances when they apply for a loan. And if you don't play by the rules, you will be held accountable."

"Somewhere along the line, our mortgage system has lost its way at a great cost to our economy. The affordable, 30 year fixed rate mortgage that allowed generations to experience the American dream of home ownership has been tragically replaced with subprime loans, teaser rates and unaffordable payments."

"Common sense principles like an ability to pay were abandoned in favor of schemes that involved collateralized debt obligation and credit default swaps."

"And as this financial house of cards collapsed, it is now the American taxpayers who are left holding the bag."

"I hope we have learned our lesson. It is time to bring responsibility and accountability back to mortgage lending, and to make sure we don't face another crisis like this."

H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009, has numerous provisions to reform lending practices. Some examples: the bill would require that lenders only make loans that are beneficial to consumers and prohibit them from steering borrowers into higher priced loans. The bill would also prohibit lenders from making loans to borrowers who can't afford the payments and make it illegal for borrowers to lie on their loan applications.

The bill would ensure that mortgage lenders make loans that benefit the consumer and prohibit them from steering borrowers into higher cost loans. It would establish a simple standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold. For mortgage refinancing, the bill requires that all loans provide a net tangible benefit to the consumer. Also, for the first time ever, it would make the secondary mortgage market responsible for complying with these standards when they buy loans and turn them into securities.

Under the measure, lenders and the secondary mortgage market who don't comply with these standards would be held accountable by consumers for rescission of the loan and the consumer's costs for rescission, including attorney's fees. They would also have the option to rework a loan to conform to the bill's standards within 90 days of receiving notice from the consumer.

In addition, the bill encourages the market to move back toward making fixed-rate, fully documented loans. During the housing boom, mortgage lenders moved away from common sense underwriting practices, giving rise to risky, exotic mortgages and practices such as "no doc" lending and allowing loans with "negative amortization" features.

Source