|Representative Barney Frank has championed the bill, which targets abuses in the home loan industry.|
WASHINGTON - The House could vote as soon as next week on a bill that would make sweeping changes to the home loan industry as defaults and foreclosures continue to rise among financially strapped borrowers.
A bill crafted by Democrats that would outlaw abusive lending practices aimed at borrowers with shaky credit obtained support yesterday from several Republicans after numerous modifications. The House Financial Services Committee, chaired by Representative Barney Frank, a Massachusetts Democrat, voted 45 to 19 in favor of the bill last night after a daylong hearing, sending the measure to the full House.
Similar legislation was introduced in May by Senator Charles Schumer, Democrat of New York, but has been stalled in the Senate.
Financial markets have been turbulent for much of the year amid worries about the growing scope of losses in investments tied to residential mortgages.
On Capitol Hill, lawmakers debated whether action by Congress would stabilize the market or make it harder for borrowers to obtain mortgages. Some Republicans called the lending bill a good compromise.
"Too much action and we worsen the problem," said one Republican supporter, Representative Judy Biggert of Illinois. "Too little action and we allow it to happen again."
Many other Republicans, however, said it would create unnecessary bureaucracy and regulations and make it harder for borrowers to refinance loans due to reset at higher interest rates.
The bill would:
Ban lenders from making loans that borrowers don't have the ability to repay.
Prohibit lenders from steering homeowners into refinanced mortgages that don't provide any benefit.
Make Wall Street banks that package mortgage securities into investments liable for violations of lending laws.
Create a nationwide licensing system for mortgage brokers and bank loan officers.
The industry has been split on that last provision, with mortgage brokers supporting the requirement and mortgage bankers saying it should only apply to brokers.
The Mortgage Bankers Association said the bill should override any state or local laws that impose more stringent regulations.
Separately, the House Judiciary Committee is scheduled to vote today on a measure that would allow bankruptcy judges to be able to modify loans to keep struggling borrowers from losing their homes. That idea is backed by Democrats and consumer groups, but ardently opposed by bankers, who say it would further dampen the mortgage market and result in increased bankruptcy filings.