For every noteworthy market downturn, it seems that there’s always someone saying, or perhaps more accurately, Congress hearing, “there oughta be a law. . . .” And so it is with the subprime mortgage decline and spike in home foreclosures. The House of Representatives answered the call, real or imagined, earlier this month by passing the Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R.3915).
The House bill tackles a series of perceived problems in lending and mortgage brokering practices. And then, according to the bill’s summary, it does this:
Sets forth minimum repayment standards for residential mortgage loans. Requires creditors to determine, based on verified and documented information, that a consumer has a reasonable ability to repay the loan, according to its terms, and all applicable taxes, insurance, and assessments.
Did you catch that? It appears that the House of Representatives’ solution to the troubled mortgage market is for Congress to jump into the underwriting process. So even while the consequences of bad lending and borrowing decisions are being meted out among financial institutions, investors, and homeowners, the House proposes to step in and make things just a little bit worse, providing its own brand of restriction on home loans.
You can read more about the Mortgage Reform and Anti-Predatory Lending Act of 2007 at MarketWatch.
