Mortgage Lenders Must be Trained and Held Accountable (Rep. Marcia Fudge)
A newlywed couple seeking a home never knew they were risky borrowers as a result of limited credit history, negative income-to-debt ratio, and virtually no savings. Eager to purchase a home, they heavily relied on their broker’s advice to determine how large a mortgage they could afford. With his reassurance, they took on a mortgage that accounted for 70% of their combined income. A year later, they entered foreclosure.
Everyone in this scenario assumes blame, but the broker was most aware of the impropriety of the loan he advised the family to assume.
In response to the predatory practices of some mortgage brokers and agents, I introduced H.R. 2108, the Predatory Mortgage Lending Practices Reduction Act of 2009.
The Act is designed to assure consumers that mortgage brokers or agents are thoroughly trained and accountable for predatory practices. It does this by altering the law in three ways. First, the Act requires that brokers and agents issuing subprime loans undertake a rigorous certification program. Second, the legislation streamlines the process for filing complaints against unethical brokers and agents. Finally, the Act creates civil penalties for violations of federal predatory lending laws.
According to the Center for Responsible Lending, 2.4 million American homeowners will be at risk of foreclosure in 2009. That number could rise to 8.1 million over the next four years. While the mounting foreclosures are due to a number of factors, predatory loans in particular have caused many families to lose their homes. Congress has the power to curb predatory practices and empower consumers to choose ethical lenders. We must not miss the opportunity to reform the mortgage industry by requiring lender training and improving accountability.
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