NOVEMBER 2004

Bipartisan Federal Predatory Lending Bill

Prior to the recent elections, two lawmakers in the U.S. House of Representatives announced plans to sponsor and push legislation next year that would set preemptive national standards for subprime mortgage lending. Representatives Bob Ney (R-Ohio) and Paul Kanjorski (D-Pennsylvania) said in a joint press release that their goal would be to balance the "availability of nonprime mortgage credit and the need for a strong new federal nonprime mortgage lending law to provide clear and uniform national rules that protect all borrowers." Both representatives are senior members of the House Financial Services Committee, and have the support of Committee chairman Michael Oxley (R-Ohio).

Of course, the devil is in the details. Ney is the sponsor of H.R. 833 in the current Congress, a bill that calls for preemption of federal, state and local anti-abuse laws, in exchange for somewhat tougher requirements under the federal Home Ownership and Equity Protection Act (HOEPA) and some new consumer education and mortgage broker licensing requirements. On the other hand, the mortgage industry newsletter Inside B&C Lending (Bethesda, MD) reports that Kanjorki's legislative aids recently previewed a legislative plan that would pull components of various state anti-abuse laws to craft tougher protections than those in the current HOEPA regulation or in Ney's H.R. 833. Also, Kanjorski is on record as supporting lower loan pricing trigger points for classifying mortgage loans as "high-cost," which triggers extra restrictions under the current HOEPA regulations. But, the Ney and Kanjorski drafts have features in common as well. Both would limit assignee liability (i.e., the imposition of liability for violations of anti-abuse laws on purchasers of mortgages, including those in the secondary, securitized market) to egregious cases, and both would prohibit mortgage loan servicers from profiting from foreclosures.