Mortgage Foreclosure & Refinance Resource

The House Financial Services Committee has passed the Mortgage Reform and Anti-Predatory Lending Act of 2007, which will now move towards the full House of Representatives vote possibly as early as next week.

The bill has made great strides in forcing lenders to only issue home loans and mortgages which borrowers can afford by

• Establishing a Licensing System for Residential Mortgage Loan Originators
• Creating a Residential Mortgage Loan Origination Standards
• Requiring Minimum Standards for All Mortgages
• Enhancing Consumer Protections for High-Cost Mortgages
  • Prohibiting excessive fees for payoff information, modifications, or late payments,
  • Prohibiting practices that increase the risk of foreclosure, such as balloon payments, encouraging a borrower to default and call provisions
  • Requiring pre-loan counseling
• Creating the Office of Housing Counseling

These are all great steps towards helping people avoid foreclosure and keep their housing. Unfortunatly there is one big issue with the bill as it is currently written. Borrowers have only limited ability to pursue legal claims against Wall Street investors that profited greatly from abusive and predatory mortgage lending. It leaves many aggrieved borrowers without adequate relief and would give the biggest players in the mortgage market insufficient incentive to avoid buying abusive loans, that are most likely to be foreclosed upon.

According to the New York Times:

Under the bill, it would be illegal for a creditor to make a loan without documenting the borrower’s ability to repay. It would also be illegal for creditors to refinance existing loans into new ones that are virtually impossible to pay off, a process known as “equity stripping.” The Frank amendment would impose the bill’s limited liability federal remedies to those specific violations. And worse, it could even extend to any state law that addresses other loan violations, but may have some connection to ability to repay or equity stripping. That could kill state-based cases against unfair loans, deceptive lending, fraud and other abuses if they pertain in any way to the ability to repay or refinancing.

Write to your representative today and ask him/her to vote no, until the bill allows for the consumers to hold those who profit the most from issuing loans that will default, to be held responsible.