House bill targets predatory mortgages

WASHINGTON – With hundreds of thousands of families facing foreclosure in recent months, lawmakers have introduced legislation aimed at protecting consumers against predatory mortgages.

The bill, sponsored by House Financial Services Committee Chairman Barney Frank, D-Mass., and North Carolina Democratic Reps. Brad Miller and Mel Watt, is an update from similar legislation filed in 2005. It’s based largely on North Carolina’s predatory lending law, often considered among the most stringent in the nation.

Among other provisions, the legislation would:

•Require mortgage brokers and bank loan officers to be licensed.

•Require those who make loans to establish that borrowers have a reasonable ability to repay a loan.

•Prohibit home refinancing unless the borrower will receive a “net tangible benefit.”

•Prohibit the financing of points and fees.

•Prohibit brokers from earning more money by steering borrowers into higher-risk loans.

•Prohibit prepayment penalties on subprime loans.