Bill restricts mortgage lenders

The House measure aims to reform the subprime
lending industry.

WASHINGTON (AP) — With home foreclosures skyrocketing, the House voted Thursday to crack down on mortgage lenders by forcing them to get licenses, making them responsible for discovering whether borrowers can really repay and fining them for steering people toward risky subprime loans.

The measures are designed to keep more people from sinking into the current mortgage crisis, where prospective home owners with shaky credit got mortgages with low interest rates only to see the rates rise and bring monthly mortgages up to prices they cannot afford.

More than 2 million adjustable rate mortgages are scheduled to reset by the end of 2008.

Many American homeowners are expected to go spiraling into debt, with the number of homes involved in foreclosure proceedings nationwide almost doubling in the third quarter of this year when compared with 2006, according to RealtyTrac Inc.

“What we have today is a bill that cannot undo what happened, but makes it much less likely it will happen in the future,” said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.

But Republicans and the White House warned that congressional meddling with mortgage markets could make things even worse. Many Republicans argued the bill would make it harder for borrowers to refinance loans due to reset at higher interest rates, and make it almost impossible for poor people to get loans to buy a house.

“Congress does two things very well: one is nothing and two is overreact,” said Rep. Tom Price, R-Ga. “While we have had a period here where some credit, some loans, were unwisely given, but allowing individuals, allowing Americans to purchase homes and realize their American dream is a good thing.”

But Democrats said the subprime market needs to change to ensure that people get loans that are beneficial to them, not just good for the bottom line of some corporation. “This bill is not designed to harm the subprime market, it’s designed to reform and correct it and make it work properly,” said Rep. Ralph Ellison, D-Minn.

The bill passed 291-127. It now goes to the Senate, where a similar bill has been stalled for weeks.

The White House did not threaten to veto the bill. “But the administration has concerns with the bill as drafted because it includes provisions that unduly restrict access to credit for potential home buyers and reduce refinancing opportunities for current homeowners,” the administration said in a statement.