Mortgage Reform Bill Considered by the House Committee

Staff Writer, May 7, 2009

The United States House Committee recently approved, in a vote of 49-21, the Mortgage Reform and Anti-Predatory Lending Act of 2009. This bill is an enhanced version of that which was adopted by the House in 2007, but which was never passed in the Senate. It is being sponsored by Reps Brad Miller (D-NC), Melvin Watt (D-NC), and Chairman Barney Frank (D-MA).

According to an article which was posted on realestaterama.com, “Several (of the proposed amendments) take steps to mitigate the more extreme measures in the bill and broaden the safe harbor for qualified loans. One amendment provides for greater agency flexibility in implementing the 'skin in the game' provision that requires originators to retain 5% of the risk when transferring a mortgage.”

The proposed legislation will also put further restrictions on the following:

• Prepayment penalties

• Single-premium credit insurance

• Pre-dispute arbitration

• Waiver of statutory cause of action

• Negative amortization (for which additional disclosures are required)