27 Aralık 2007 Perşembe

Senate Will Consider More Restrictive Rules on Mortgages

Christopher J. Dodd, the chairman of the Senate Banking Committee, will introduce a bill today that would impose new regulations on mortgage brokers and investment banks and restrict certain aggressive lending practices, Congressional aides said yesterday.

While similar in some respects to a measure passed by the House last month, the Dodd bill would take a harder line against mortgage brokers and Wall Street firms. The measure is expected to face significant opposition from mortgage companies and banks.

The measure is not expected to make much headway until sometime next year, and it could change based on rules that the Federal Reserve, which has broad authority to regulate mortgage lending, is expected to issue in the coming weeks.

The proposal is a change in direction for Mr. Dodd, a Democrat from Connecticut who is running for president. Earlier in the year, he said that the Fed could address most of the pressing issues in mortgage lending and that federal legislation was not needed. Since then, default rates on mortgages made to people with poor credit have surged, and policy makers in Washington have focused more intently on the housing market.

Like the House measure, which is sponsored by Representative Barney Frank, Democrat of Massachusetts, Mr. Dodd’s bill requires lenders to make only those loans that benefit borrowers and that they can repay. But Mr. Dodd’s proposal would also require brokers to act in the interest of borrowers, and that Wall Street firms could be sued.

Investment banks that securitize mortgages could also be sued under Mr. Frank’s measure, but state authorities would be prohibited from pursuing certain claims against Wall Street.

In an interview last week, Mr. Frank said he planned to toughen his bill’s enforcement provisions as it relates to investment banks, but he added that the demand for home loans would dry up if investors in mortgage securities were subject to lawsuits brought by state officials.

Unlike the Frank bill, Mr. Dodd’s proposal would bar specific practices in subprime lending like prepayment penalties, which borrowers have to pay if they try to refinance or pay off their loans earlywithin a few years, and yield spread premiums, which are commissions lenders pay to brokers for gettingpersuading borrowers to take out a higher-cost loan than they could qualify for. But Mr. Dodd’s bill would not create a national registry of brokers and loan officers as the House measure would.

Mr. Frank’s measure passed by a wide margin in the House but has not advanced in the Senate, where procedural rules make it difficult to pass legislation that does not have bipartisan support — a political reality that could also hobble Mr. Dodd’s bill.

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