Congress Introduces Bill to Protect National, Florida Mortgage Holders
House Republicans introduced a bill last week designed to protect Floria mortgage borrowers from abusive lending practices — the second major piece of legislation introduced in Congress on the issue this year.
The GOP proposal comes amid new signs of distress in the housing market.
Real estate information company RealtyTrac said Thursday there were 164,644 foreclosure filings nationwide in June, up 87 percent from a year ago. In the South Florida real estate market, the number of foreclosures and people falling behind on their monthly mortgages has steadily climbed since the beginning of the year.
The two biggest credit ratings agencies on Tuesday downgraded billions of dollars worth of bonds backed by subprime Florida mortgages, which are given to borrowers with shaky credit.
Rep. Spencer Bachus, R-Ala., the ranking Republican on the House Financial Services Committee, said he hoped the bill, requiring mortgage lenders to be licensed, would be considered quickly.
The bill also proposes setting up a national registration system for lenders and would prod them to better evaluate a potential borrower’s ability to repay.
Early payment penalties would be restricted for some adjustable-rate mortgages. And subprime mortgage lenders would be required to set aside payments for property taxes and homeowners’ insurance.
“It is time to adopt an approach that maintains the benefits that subprime lending has brought to our citizens while strengthening protections against the abusive practices which threaten the subprime market,” Bachus said in a prepared statement.
The National Association of Mortgage Brokers said it supports the idea of registry for all mortgage lenders.
“We want bad actors out of this industry whether they work for a bank, a lender or a [Florida mortgage broker],” Roy DeLoach, the trade group’s executive vice president, said in a statement.
A spokesman for the Mortgage Bankers Association said the group was still reviewing the bill and declined to comment. Lawmakers held numerous hearings this spring about how to address rising defaults in subprime mortgages.
Earlier this year, Sen. Charles Schumer, D-N.Y., and two other senators introduced a bill mandating tougher federal standards for Florida mortgage lenders.
Schumer’s bill also called for $300 million of government money matched by double that amount from the mortgage industry to be channeled to community groups that help financially distressed homeowners avoid foreclosure.
On Thursday, Schumer applauded the Senate Appropriations Committee’s approval of $100 million in government funding through the Department of Housing and Urban Development for nonprofit agencies that counsel borrowers with unaffordable subprime loans.
