The Mortgage Reform and Anti-Predatory Lending Legislation

The Mortgage Reform and Anti-Predatory Lending Legislation as it’s currently written is designed to:

· Stop predatory lending by calling for all mortgage originators, brokers and bank loan officers to be licensed and registered.

· Ensure that mortgage originators act in the borrower’s best interest. Mortgage originators must present borrowers with loan products that match borrowers’ qualifications.

· Require subprime lenders to take into account the fully-indexed rate and fully-amortized payment on adjustable rate loans before they give the loan to the borrower. This simply means the lender must show the borrower can pay the mortgage payment after it has fully adjusted to its highest rate. This is what happened to many people who ended up in foreclosure: they didn’t understand that their mortgage payment would keep going up, and soon they couldn’t afford it.

· Require the lender to include taxes and insurance payments while calculating whether or not a borrower can afford a house. Lenders must include them with the principle and interest calculations, so borrowers can see what their actual monthly payments will be.

Require a borrower to participate in pre-loan counseling if the borrower will receive a high-cost loan .A “high-cost loan” refers to a mortgage with very high points and fees.

Many people are opposed to the bill because they believe it will end the practice of brokering mortgage loans. By eliminating the yield spread premiums (i.e., commissions) the broker income will be affected, which means there will be fewer and fewer mortgage loan brokers. In turn, consumers will have fewer options to obtain financing.