Reps. Brad Miller (D-NC), Mel Watt (D-NC) and Barney Frank (D-MA) today introduced new legislation intended to "combat abuses in the mortgage lending market," according to a joint press statement issued today by the House Financial Services Commitee. The Mortgage Reform and Anti-Predatory Lending Act of 2007, among other proposed changes, would make "secondary market securitizers" partially liable for any predatory lending activity in the absence of up-front portfolio due diligence. Reuters reports:
"The securitizers will be liable if they package loans that should not have been made in the first place," Frank said in a conference call with reporters. "Now there is a safe harbor in the bill that would include doing some due diligence including some sampling. We are not going to hold them absolutely liable for any bad loan made, and in fact, if they have done some steps then they will be protected," Frank said.
The bill will also establish a federal duty of care, prohibit steering, and call for licensing and registration of mortgage originators, including brokers and bank loan officers. The proposed bill also contains new foreclosure protections for renters: in case of foreclosure, any successor who takes over the property will have to honor preexisting leases. Tenants without a lease will have at least 90 days before being required to vacate. In addition, the bill will incorporate recommendations by Rep. Melissa Bean (D-IL) to require counseling for certain first time homebuyers; and Rep. Chris Murphy's (D-CT) anti-steering legislation. "Barney Frank, Mel Watt and I see protecting vulnerable homeowners from predatory mortgage lenders as a core, defining Democratic value. When a family's home is a stake, lenders had better play by a fair set of rules," said Rep. Brad Miller. “This bill represents a significant step forward to clean up and prevent a number of the questionable practices that, unfortunately, took hold in the mortgage lending industry in the last several years. I hope the industry will embrace the changes and allow the bill to move forward quickly," said Rep. Melvin Watt. A section-by-section overview of the comprehensive proposed legislation is available here. I'll post a more complete take on the sweeping reforms included when I've had a chance to read everything.