Full House Passes H.R. 3915

The bill, known as the Mortgage Reform and Anti-Predatory Lending Act, was passed by a vote of 291-127, according to the Mortgage Bankers Association.

The chief sponsor of the legislation was Rep. Brad Miller (D-N.C.). In his interview with C-SPAN today, some of the major provisions outlined were a suitability requirement, mortgage broker licensing, and some legal liability for securitizers.

“If these protections had been in place five years ago, we wouldn’t have the problem we have now,” Miller said. “It should keep it from happening again.”

President Bush, like many House Republicans, opposed H.R. 3915.

“The administration has concerns with the bill as drafted because it includes provisions that unduly restrict access to credit for potential homebuyers and reduce re-financing opportunities for current homeowners,” the White House said in a statement yesterday. “Targeted regulatory efforts are already underway to address many of the issues raised by H.R. 3915.”

The Mortgage Bankers Association continued its assault of the bill.

“This bill will limit credit availability and options for thousands of Americans,” the group’s chairman, Kieran P. Quinn, said in a statement today.

MBA said it has “worked tirelessly” with Rep. Barney Frank, (D-MA), chairman of the House Committee on Financial Services, resulting in some improvements to the bill.

“Unfortunately, many of our key concerns have not been addressed,” MBA said. “It still allows for the patchwork of state laws that serve to foster confusion for lenders and borrowers alike. Its rebuttable presumption provisions still expose lenders to unacceptable liability risk. It creates ambiguity around the legitimate payments between secondary and primary mortgage markets that increase the flow of capital to homeowners. And the lowered [Home Owners Equity Protection Act] triggers will most assuredly eliminate mortgage products that have worked well for many borrowers.”

But MBA “still opposes virtually any legislation,” Miller said on the C-SPAN show.

Miller went on to explain that only 10 percent of subprime loans were used for home purchases, while the rest are used to “pay off the last mortgage. The central evil of predatory lending is that it is not a single loan, it is to trap people in a cycle of borrowing.”

Rep. Patrick McHenry (R – NC), who opposed the bill, noted on C-SPAN H.R. 3915 eliminates the ability of borrowers to finance points, fees and prepayment penalties on the loan being paid. He also suggested that if it passes, borrowers facing foreclosure who need to refinance out of their current mortgages will be limited while liquidity only worsen on Wall Street.

“This bill will have a widespread chilling effect on all mortgage lending,” McHenry said.

“The Administration does not support the provisions of H.R. 3915 that could overly constrict the primary and secondary markets for mortgage finance, such as the bill’s specific underwriting standards, assignee liability provisions, and the subjective obligations for mortgage originators,” the White House added. “The Administration is concerned with these and other provisions that could lead to greater uncertainty and increased litigation, which could cause an undesirable reduction in mortgage credit and a drop in future homeownership. Further, the Administration believes that a mortgage origination standard should be national and should preempt the potential for the States to create a patchwork of different legal regimes.”

One group happy about the bill’s passage was the National Association of Mortgage Brokers. The group was most satisfied with its success preserving mortgage broker yield spread premiums.

“The yield spread premium is a legal payment paid by a lender to a mortgage broker and it is an integral tool used by mortgage brokers to offer borrowers flexibility in the amount of cash they will need in order to close on a home loan,” NAMB President George Hanzimanolis said in an announcement.

Brokers were also happy with the requirement that originators at banks and lenders must also be part of the proposed national registry.

“NAMB believes the national registry of all originators will be effective protection for consumers against bad actors in this industry,” Hanzimanolis continued. “Its all-inclusive national scope means mortgage originators who break the law cannot move from state to state or company to company without being detected.”

NAMB opposes, however, the provision of the legislation that lowers the HOEPA threshold from 8 percent to 5 percent.

Related:

HR 3915 Approved by Committee
HR 3915 advanced through the House Committee on Financial Services. The proposed legislation would limit yield spread premiums and push more loans into the burdensome, high cost category.