House Passes Bill To Curb Abusive Lending Practices

The U.S. House of Representatives passed a bill to curb abusive practices and predatory lending in the mortgage industry. Rep. John Spratt (D-SC) voted for the bill, which passed the House on May 7.

The Mortgage Reform and Anti-Predatory Lending Act, H.R. 1728, outlaws many of the worst actions that marked the subprime lending boom and led to the nation’s highest foreclosure rate and deepest recessions in decades.

“This recession is not a garden variety recession,” said Spratt. “A core component is the large number of Americans who lost their homes due to foreclosure. With this bill, we are ensuring that a financial crisis like this, which started with irresponsible subprime lending, never happens again.”

H.R. 1728 prohibits lenders from steering borrowers into higher cost loans. It also prevents borrowers from deliberately misstating their income to qualify for a loan. For the first time, it holds accountable all of those who originate and sell and buy loans, including Wall Street firms that buy up and bundle mortgages for profit.

In addition, the bill sets new standards for all home loans. Under the new rules, institutions will be required to ensure that borrowers can repay the loans they are sold; refinancing must benefit the consumer; and fully documented loans will be encouraged.

“I was pleased to vote for this bill and see it pass the House,” Spratt said.