Frank Gets GOP Support for Mortgage Reform Bill
Bipartisanship means both political parties working together to achieve a result from which the entire nation can benefit. It is a rare bird, almost never seen under the Busheviks. However, Congressman Barney Frank (D-MA), who chairs the House Financial Services Committee, and two of his GOP colleagues, ranking member Spencer Bachus of Alabama and Judy Biggert of Illinois, have found common ground on a mortgage reform bill. There might just be hope for Congress after all.
According to Business Week, “The bill would bar incentive payments given to mortgage bankers or brokers for signing up borrowers for overly expensive loans. It also would make Wall Street banks that package mortgage securities into investments liable for violations of lending laws, mandate licensing for mortgage brokers and bank loan officers and limit penalty charges for borrowers who make their payments early. The Mortgage Bankers Association said in a letter to Frank and Bachus on Monday that the bill should override any state or local laws that impose more stringent regulations. Lenders, the group said, should not have to work ‘with dozens of different standards’ nationwide.
Now, some of the proposed provisions were not particularly useful. Mr. Frank’s original text would have allowed those who took out loans that were “inappropriate” to their needs to sue their lender. The GOP forced that rats’ nest of lawsuits out of the bill, and rightly so. Who is to say what loan is “appropriate” in a free-ish market?
The Hill.com noted “In addition, the legislation would prod so-called securitizers, the Wall Street firms that buy home loans and then repackage them for sale to investors, to stand guard against predatory practices. Where securitizers fail to meet certain standards, victims of lending abuses would have the right to recoup costs and pay back only the principal of the loan. In a letter to Republican colleagues, Bachus explained that Frank had strengthened the safe harbor for securitizers against being held liable for abuses and had cut the time that borrowers could file suit from six years to three years.” In other words, he gave a little to get a little.
Last week, Congressman Frank said that it was not “in anybody's interest for us to have the kind of knockdown battle that would further roil markets.” Congressman Bacchus has been a long-time advocate for mortage market reform. He noted in a press statement, “The most important fact about this compromise is that it has significant new safeguards to protect families from abusive lending. This is the culmination of discussions that began two years ago when I sent chairman Frank an outline for a subprime lending bill.” Both sides win, as does the country and its economy.
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