The Mortgage Reform and Anti-Predatory Lending Act of 2009 (H.R. 1728) was introduced March 26 by coauthors Rep. Brad Miller (D-N.C.), Rep. Melvin Watt (D-N.C.) and Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. It is expected to move quickly through the House this month and go to the Senate by May. The odds of passage in some form are high, according to banking and housing industry lobbyists.
*Ban all fees paid to loan officers that are tied to the interest rate of the mortgage or the type of the loan. During the headiest years of the boom, Wall Street investment banks paid mortgage brokers higher fees if they originated exotic loans such as short-term subprime adjustable-rate, interest-only, payment-option and "stated income" no-documentation loans with minimal or no down payments.
*Create mandatory minimum national quality standards for all mortgages. The rules would encourage lenders to make fully documented 30-year, fixed-rate loans with prevailing market rates, as opposed to loans with higher-risk features such as adjustable payments and negative amortization.
*The bill would also impose a federal "duty of care" standard requiring loan officers to offer applicants terms and rates that are "appropriate" to their income and ability to repay.
*Refinancings would have to pass a "net tangible benefit" test demonstrating that the replacement loan is superior to the borrower's current terms.
*Lenders would have to offer applicants the option to choose any loan without a prepayment penalty attached.
*Mandatory arbitration clauses in most mortgages would be banned.
*Allow borrowers who are put into mortgages that violate the new law to seek legal redress through cancellation of the loan contract, refund of all payments and fees and compensation for legal costs.
