Christopher Dodd Calls for Bad Credit Mortgage Law
Senate Banking Committee Chairman Chris Dodd said he is drawing up legislation to strengthen subprime mortgage lending standards amid a credit crunch that has shaken financial markets around the world.
“Clearly, the [Florida mortgage brokers] need to be regulated,” Dodd, a Connecticut Democrat, said during an interview on “Political Capital with Al Hunt,” scheduled to air this weekend on Bloomberg Television. Lending standards need “some accountability here so that people have some sense of a person’s ability to pay.”
The Federal Reserve has joined central banks in Europe, Japan and Australia in adding at least $130 billion to the banking system in an effort to avoid a crisis in credit markets. The turmoil stems from rising delinquencies in U.S. subprime mortgages, which in turn affected European banks that invested in them.
In the Aug. 8 interview, Dodd praised Fed Chairman Ben S. Bernanke, saying the Fed has “clearly” started to act on fraudulent or deceptive lender practices.
“I’m far more optimistic about where they’re heading,” the senator said. “But I don’t think it’s enough.”
Dodd, a Democratic presidential candidate, said he agreed with much of a proposal for protecting national and Florida mortgage borrowers by New York Senator Hillary Clinton, one of the frontrunners for the party’s nomination.
Her plan, announced Aug. 7, includes banning prepayment penalties and greater regulation of mortgage brokers. She also would set up a $1 billion fund for state programs that help borrowers avoid foreclosure.
“I’m delighted that she’s interested in the subject,” Dodd said, citing hearings his committee has held on the issue.
The number of mortgages entering foreclosure in the U.S. reached a record in the first quarter as defaults spread from bad credit Florida mortgage borrowers, those with shaky credit, to people with reliable records.
Dodd’s committee also has proposed legislation to force China to raise the value of its currency.
Last month, Treasury Secretary Henry Paulson called the bill the “wrong approach” and said it risks provoking a protectionist reaction from other countries.
Dodd dismissed the criticism and predicted the measure will pass this year. The bill “empowers” the Treasury and Paulson to insist that China comply with World Trade Organization rules, he said.
SOURCE: Bloomberg News
